An option for seeking regular income in a volatile world
In this week’s video insight David discusses how investors seeking regular income should consider the Aura High Yield SME Fund and the Aura Core Income Fund. As the Reserve Bank of Australia (RBA) have tightened their official cash rate over the past year, we have seen the monthly payments of the Aura fund’s jump from around 0.60 per cent per month towards 0.80 per cent per month.
Transcript
David Buckland:
Seeking regular reliable income, my wife Penny and I invested in the Aura High Yield SME Fund around 15 months ago. Over this period, I have got to know Brett Craig, the Portfolio Manager at Aura Credit Holdings, well and have been very impressed by his relatively conservative approach within the high yield credit sector.
The Fund has had an average loan duration of under six months. Brett and his team have analysed 70 platforms and are currently partnered with only 7. In the event of default, these originators would lose their interest and their capital prior to the Aura High Yield SME Fund. Brett and his team do their own analysis by “scoring” the individual borrowers to ensure a very low risk of default. Data regarding credit experiences and the “theoretical positioning” of the Aura High Yield SME Fund over the past four decades provides further comfort.
The focus from Australia’s major Banks on relatively small loans to Small and Medium Enterprises is in structural decline, due to the rules around capital requirements, and this has seen solid growth from the Alternative Finance Sector and allowed the likes of the Aura High Yield SME Fund to deliver a compound annual return of 9.89 per cent, after expenses, assuming the monthly distributions were reinvested, over the past 69 months.
As the Reserve Bank of Australia (RBA) have tightened their official cash rate over the past year, we have seen the monthly payments jump from around 0.60 per cent per month towards 0.80 per cent per month. As mentioned, the Fund has an approximate six-month duration and so the monthly payment could, if Brett had elected not to rein in the Fund’s risk profile, climb a little further.
As mentioned in the April 2023 Report, the team have been skewing the Fund away from identified pockets of risk. This risk means Brett is getting conservative and he currently has 27 per cent of the Fund’s exposure to Agriculture and there is no property development funding. I am pleased to say that 13 per cent of the portfolio is currently in cash to again accentuate the conservatism that Brett Craig and his team at Aura Credit Holdings have been applying to both the Aura High Yield SME Fund and the Aura Core Income Fund.
That’s all I have time for this week, please continue to follow us on Facebook and Twitter. Please be aware that the Aura products do help me sleep well at night and Brett’s conservatism, and the monthly repayment I have been receiving for the last 15 months makes me feel pretty happy.
If you would like to learn more about the Aura High Yield SME Fund (wholesale clients only), please visit the fund’s web page to learn more: Aura High Yield SME Fund
For retail investors, if you would like to learn more about the Aura Core Income Fund, please visit the fund’s web page to learn more: Aura Core Income Fund
You should read the relevant Product Disclosure Statement (PDS) or Information Memorandum (IM) before deciding to acquire any investment products.
Past performance is not an indicator of future performance. Returns are not guaranteed and so the value of an investment may rise or fall.
This information is provided by Montgomery Investment Management Pty Ltd (ACN 139 161 701 | AFSL 354564) (Montgomery) as authorised distributor of the Aura Core Income Fund (ARSN 658 462 652) (Fund). As authorised distributor, Montgomery is entitled to earn distribution fees paid by the investment manager and, subject to certain conditions being met, may be issued equity in the investment manager or entities associated with the investment manager.
The Aura Core Income Fund (ARSN 658 462 652)(Fund) is issued by One Managed Investment Funds Limited (ACN 117 400 987 | AFSL 297042) (OMIFL) as responsible entity for the Fund. Aura Credit Holdings Pty Ltd (ACN 656 261 200) (ACH) is the investment manager of the Fund and operates as a Corporate Authorised Representative (CAR 1297296) of Aura Capital Pty Ltd (ACN 143 700 887 | AFSL 366230).
You should obtain and carefully consider the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the Aura Core Income Fund before making any decision about whether to acquire or continue to hold an interest in the Fund. Applications for units in the Fund can only be made through a valid paper or online application form accompanying the PDS. The PDS, TMD, continuous disclosure notices and relevant application form may be obtained from www.oneinvestment.com.au/auracoreincomefund or from Montgomery.
The Aura High Yield SME Fund is an unregistered managed investment scheme for wholesale clients only and is issued under an Information Memorandum by Aura Funds Management Pty Ltd (ABN 96 607 158 814, Authorised Representative No. 1233893 of Aura Capital Pty Ltd AFSL No. 366 230, ABN 48 143 700 887).
Any financial product advice given is of a general nature only. The information has been provided without taking into account the investment objectives, financial situation or needs of any particular investor. Therefore, before acting on the information contained in this report you should seek professional advice and consider whether the information is appropriate in light of your objectives, financial situation and needs.
Montgomery, ACH and OMIFL do not guarantee the performance of the Fund, the repayment of any capital or any rate of return. Investing in any financial product is subject to investment risk including possible loss. Past performance is not a reliable indicator of future performance. Information in this report may be based on information provided by third parties that may not have been verified.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
