Which investments made money in September 2022?
September was a very tough month for investors with the ASX 300 Accumulation Index down 7.6 per cent, the Australian Small Ordinaries Accumulation Index down 11.2 per cent and the MSCI World Accumulation Index in US$ down 9.5 per cent. Even Government Bonds declined in value with the ASX Australian Government Bond Index losing 1.7 per cent whilst the S&P U.S. Aggregate Bond Index declined almost 4 per cent.
Aura High Yield SME Fund
For those seeking truly uncorrelated returns on investments, you may want to consider the Aura High Yield SME Fund, a wholesale product with a minimum initial investment of $100,000. Over its 62-month life its monthly distributions have ranged from 0.60 per cent to 0.93 per cent. Despite the COVID-19 scare, there have been no negative months. The Fund’s compound annual return, assuming reinvestment of income, has exceeded 9.5 per cent, after expenses, since its inception on 1 August 2017.
Brett Craig, the Portfolio Manager of the Fund, worked at Macquarie for 11 years, including as VP within the Debt Markets business, where he was responsible for originating, structuring and distributing debt products. He’s something of a trailblazer, being the first portfolio manager to originate, structure, negotiate and execute an Australian Bank Debt facility for an Alternative Finance lender.
According to the Australian Government Productivity Commissions report on small business access to financing dated September 2021, banks have reduced their SME lending – from 38 per cent of funding in 2014 to 17.4 per cent in 2021 in a total addressable market of $400 billion.
The structure Brett has put together means the originators (the actual businesses doing the primary loan assessments and lending) put their own equity into the loans, meaning their returns and capital are at risk first, aligning the investors in the Fund. Loss rates would have to be well above historical precedents before the Fund’s investors are at risk. It is possible and the market is already suggesting conditions will deteriorate in 2023 (particularly as fixed mortgage loans start rolling into variable loans at much higher rates of interest).
As the loans the Funds have exposure to are relatively short-term – think a cattle farmer who wants a loan to buy cattle to fatten up over a year (they should become more valuable as they get fatter) – as interest rates rise the loans are generally repriced with a lag and so it behaves more like a floating rate product.
Aura Core Income Fund
For those who aren’t deemed to be a wholesale investor by the Corporations Act, or those with assets under $2.5 million; or, pre-tax income below $250,000 over the past two financial years; or those who don’t make an investment of $500,000 – we have been involved with the launch of the Aura Core Income Fund, which has a minimum initial investment of $25,000. Also priced monthly, and intended to be higher up the collateral stack, the Aura Core Income Fund’s objective is to deliver an annual average return of the RBA official cash rate plus 3.5 per cent to 5.5 per cent. And that currently equates to a targeted return of 6.85 per cent to 8.85 per cent.
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
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
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.
