Aura Private Credit: Letter to investors 2022 in review
It has been an incredibly challenging yet exciting year for our team. In 2022, we moved out of a heavily COVID-19-driven market into a new set of domestic and global economic and market challenges. Climate events, geopolitical conflicts, supply chain disruptions, high inflation and rapid central bank monetary policy shifts all influenced our day-to-day lives and the investment decisions we make.
From a business standpoint, this year has seen considerable growth within the private credit arm at Aura Group. With this growth comes new opportunities. Some key highlights for us include:
- A new distribution partnership with Montgomery Investment Management enhanced our investor flows to fund the increasing number of opportunities being made available to us.
- We have received some positive industry recognition for our achievements.
- We set up a new retail strategy, allowing retail investors to tap into private credit markets that have been otherwise difficult to access on their own.
- We have reviewed over 30 new lenders this year alone.
- We have a strong pipeline of new lending opportunities set up for 2023.
- And most importantly, we have delivered stable and reliable returns to our investors for over 5 years.
As we close out 2022, we look forward to continuing to fund what we believe are the best-of-breed non-bank lenders catering to strong Australian SMEs. With the evolving economic outlook and continued borrowing shift away from the banks by the SMEs to alternate funding solutions, we have a strong pipeline to work through in the new year. Of course, our overall aim is to achieve stable returns and stability for our loyal investors, and we seek the best funding opportunities to do so.
The SME borrowing landscape continues to expand with a recent survey released by ScotPac, quantifying the shift SMEs are making away from banks and instead to non-bank lenders, with results indicating that SMEs plan to increase borrowing plans with non-bank lenders. Specifically, the survey found that “non-bank borrowing demand increased again to a record high of 33 per cent market-wide, increasing 14 per cent year-over-year and more than doubling since September 2018.”
Business growth was mixed across the country, with:
- 87 per cent of WA SMEs forecasting positive revenue growth in the next 6 months, leading the charge;
- Queensland followed with 77 per cent projecting growth;
- Victoria had only 15 per cent of businesses forecasting growth in the next six months, whilst 62 per cent predicted a negative decline; and
- NSW sat in the middle, reporting 41 per cent of SMEs forecasting growth and 32 per cent predicting no change in business revenue to eventuate.
While it is exciting to see a market our business focused on over a decade ago, anticipating strong growth and a structural shift towards the non-banks, prudential management is more important than ever. There are macroeconomic headwinds as we enter 2023 as the domestic and global economy adjusts to a new interest rate and trade environment, paired with the aforementioned geopolitical pressures. Careful asset selection is our key focus for 2023, as we strive for quality over quantity in our strategies.
We would like to sincerely thank our investors for your continued support and trust in our team with your capital. It is a great responsibility that we do not take lightly. We look forward to what 2023 has in store and wish you and your families a safe and happy holiday.
This will be our last investor communication for 2022. We will resume investor communications in mid-January and look forward to reaching out to you then. Should you have any concerns in the meantime, please don’t hesitate to reach out.
Brett Craig is responsible for portfolio management and asset origination for the Aura High Yield SME Fund and the Aura Core Income Fund. Prior to joining Aura Group, Brett held a number of roles at Macquarie Group over an 11 year period including Vice President within the Debt Markets business where he focused on originating, structuring and distributing debt products primarily in the Australian market.
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.
