31 March 2026
Australian Ethical is one of Australia's leading ethical fund managers. By investing responsibly in well-managed ethical companies, we deliver competitive financial performance to our clients and positive change to society and the environment. Since our inception in 1986, our Ethical Charter has guided all investment decisions and underpinned our business practices. Every year 10 per cent of our profits* are distributed to charitable organisations and social impact initiatives through The Australian Ethical Foundation.
To provide long-term growth by investing in small capitalisation companies that meet the Australian Ethical Charter. The fund aims to significantly exceed the return of the S&P/ASX Small Industrials Total Return Index after taking into account management costs over a 7 year period.
The opportunity to invest in a diversified portfolio of shares in small capitalisation companies on the basis of their social, environmental and financial credentials. The Fund utilises an active stock-picking management style with stocks selected for growth rather than income. All stocks are chosen on the basis of relative value where we deem the risks are being adequately priced.
| 1m | 3m | 6m | 1y | 3y | 5y | 10y | Since inception | |
|---|---|---|---|---|---|---|---|---|
| Fund | -9.6% | -17.9% | -22.0% | -6.7% | 5.0% | -0.1% | 9.5% | 10.0% |
| S&P/ASX Small Indust. | -8.4% | -14.3% | -17.8% | -0.8% | 4.7% | 0.0% | 4.7% | 5.4% |
| CY 2025 | CY 2024 | CY 2023 | CY 2022 | CY 2021 | |
|---|---|---|---|---|---|
| Fund | 8.9% | 15.9% | 10.2% | -25.4% | 14.9% |
| S&P/ASX Small Indust. | 8.8% | 12.1% | 11.4% | -21.8% | 13.7% |
Portfolio diversification: Diversify your portfolio by investing in companies and sectors not well covered by other fund managers and brokers.
Help build a better world: Invest in the new, low‐carbon economy, fund medical and technology breakthroughs, efficient transport and more.
Promote human rights: We strive to avoid any investment in companies involved in the poor treatment of asylum seekers or the exploitation of workers through poor working conditions.
Geopolitical confrontation escalated sharply during the March quarter, precipitating a fall in equities particularly for small companies. Markets are watching to see the extent to which higher energy costs flow into broader inflation, whether central banks can eventually ease interest rates, and whether growth slows smoothly or starts to show stress in jobs and credit. The jury is also out on whether AI ultimately proves to be a productivity accelerator or a driver of unemployment. As we navigate this uncertainty, what is clear is that equity valuations in selective areas are now very attractive.
Even with the abovementioned volatility and uncertainty, companies are still in need of capital to fund development, particularly those with innovative healthcare diagnosis and treatment opportunities. It has been a hallmark of Australian Ethical’s long term approach to back early-stage opportunities that aim to improve patient care and outcomes as well as providing favourable investment returns.
During the quarter, we participated in capital raisings for PYC Therapeutics, OncoSil Medical and Cyclopharm. Our investment in PYC supports the development of new treatments for Retinitis Pigmentosa (a blinding eye disease) and Polycystic Kidney Disease, both long-term conditions with no effective cures. We supported OncoSil to fund the business through its upcoming clinical trial results, with prior studies showing that adding its treatment to chemotherapy significantly improves the chances of successful surgery and patient outcomes. Finally, we invested in a Cyclopharm capital raising to support the rollout of Technegas in the United States, a lung imaging technology that uses less radiation and no contrast dye, making it safer for patients who are unwell or unsuited to conventional imaging. Importantly, these investments allow companies to progress their innovations through uncertain times and fulfil our requirement for long term favourable investment characteristics.
The fund’s long term holdings in the Utilities sector were the strongest contributors to relative investment performance over the quarter with New Zealand ‘Gentailers’ (companies that operate as both generators and retailers of electricity) Contact Energy (-1.6%), Mercury (-5.3%) and Meridian Energy (-3.4%) all significantly outperforming the benchmark as investors sought the stability and safety of more defensive sectors. The Gentailers are also experiencing better profit outlooks as the drought conditions in the prior period eased.
The sectoral laggards included travel Technology company Siteminder (-53.0%) underperforming the market given AI concerns and fears of business disruption. This also hurt education software provider Janison Education (-60.3%). Our view is that these businesses retain significant competitive advantages capable of withstanding threats from AI, which appear overdone, and there is attractive value on offer. Consumer Discretionary company Web Travel Group (-45.4%) also fell amidst the geopolitical risk that emerged during the period.