Private Credit: a smart choice
For many years I’ve advocated investment in equities. That won’t change. I believe owning quality growing businesses is the surest way to long-term wealth creation. A quick glance at the ‘rich lists’ of the wealthiest people in Australia, for example, reveals a list of business owners. And the stock market provides investors with access to many of the very same businesses. Purchase at a rational price a portfolio of businesses whose earnings march upwards over the years, and so will the market value of your portfolio.
But volatility, and sometimes very serious volatility, is something every equity investor must also accept.
And that’s why diversification across asset classes is essential for investors. Beyond the usual options however, a new asset class is accelerating its growth thanks to a combination of heightened demand in funds, particularly from businesses looking for expansion capital, and a change in the ability of the major banks to service those needs. The result is Private Credit, where investors lend capital to businesses through skilled investment managers and lending originators. Previously the prized preserve of high net worth and family office investors, and with a storied history in Europe and the U.S., Australian investors now have access to this important asset class.
When I first met Brett Craig, Head of Private Credit at Aura Group and was invited to conduct due diligence on his Aura High Yield SME Fund, I not only discovered a Private Credit fund with the same focus as ours – to invest in quality businesses – in Brett’s case he lends to them rather than invests in their equity and has a superior position in the capital stack – I also discovered how performance above the stock market can be achieved with a lot less volatility.
Brett and the Aura team have produced a net return of greater than 9.5 per cent per annum since August 2017, including during the COVID-19 pandemic, and achieved it with zero volatility of capital. In other words, while his fund produced a high return with monthly distributions reinvested, the unit price had never varied from one dollar.
That’s extraordinary, and it’s why we agreed to team up with Brett and his team and offer his capability to investors like you, joining a suite of expert investment managers that Montgomery now represents.
Q&A with Brett Craig on Private Credit
Watch this short Q&A interview with myself and Brett on Private Credit. We discuss how Private Credit funds work, how they’re structured to protect against risks, and the impact of the current economic environment on the Private Credit sector.
Find out more about the Aura Private Credit Funds
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.
* Net returns for the Aura High Yield SME Fund (for wholesale investors only) as at 31 May 2023. Performance assumes reinvestment of distributions since inception in August 2017. Past performance is not a reliable indicator of future performance.
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.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
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.
