Roger Montgomery
Montgomery Investment Management (Montgomery) through its recent partnership with Aura Group, is pleased to announce the launch of its second income strategy, the Aura Core Income Fund.
The Aura Core Income Fund (the Fund) is an open-ended, Australian-registered managed investment scheme with a minimum investment of $25,000. The objectives of the Fund are to preserve capital and provide stable monthly income and portfolio diversification through exposure to a pool of Australian private debt assets including asset backed SME loans. The Fund aims to achieve a Target Return of the Reserve Bank of Australia (RBA) Cash Rate plus 3.5%–5.5% per annum net of fees and costs through the economic cycle. Currently, the RBA Cash Rate is 2.35%, equating to a current target return of 5.85%–7.85%[1] . The first units in the Fund are intended to be issued on 4 October 2022, and the performance will be available to report in November 2022.
The Fund offers retail clients exposure to the private debt asset class and aims to perform through the economic cycle to deliver stable monthly income from a diversified portfolio of credit exposures across industries and geographies. The Fund may offer protection against inflation as returns are earned from the interest generally charged at a floating rate above the RBA Cash Rate. The credit asset class has little correlation to public markets and is a complement to investor portfolios that invest in equities, property and cash.
Traditional bank lenders have focused their lending operations on large business customers, seeking to profit from scale. Consequently, SMEs have been searching for alternative sources of credit. This combination of low cash yields and an absence of lending to SMEs by banks, provides investors with a unique opportunity to provide funding.
Adding the Aura Core Income Fund to the Montgomery product suite meets the increasing demand from investors for stable income. Over the last decade, the Australian non-bank corporate lending and alternative asset managers who specialise in SME loans, corporate lending, consumer loans and asset-backed loans now cover a broad range of products with very different risk and return characteristics available to wholesale and retail clients.
The first fund in our partnership with Aura Group was the Aura High Yield SME Fund, which has a history of delivering stable yield by investing through online lending platforms in Australia. This Aura High Yield SME Fund has generated attractive and stable monthly income from a well-diversified portfolio of loans to small and medium enterprises over 60 months for wholesale clients. It delivered a compound annual return of 9.62% since inception, after expenses, assuming reinvestment of monthly distributions. Past performance is not a reliable indicator of future performance.
Roger Montgomery, Chairman of Montgomery Investment Management, said, “Following the signing of our Distribution Partnership with Aura Group in May 2022, I am delighted Montgomery Investment Management can now offer a high-quality income solution for our retail clients and investors in partnership with Aura Credit Holdings working with Brett Craig, the Portfolio Manager. By lending to Small and Medium Enterprises through loan originators, the focus on income has produced an enviable track record for the Aura High Yield SME Fund for wholesale clients.
Now, we can offer the Aura Core Income Fund to our retail clients.” Brett Craig is the Portfolio Manager and Managing Director of Aura Credit Holdings. He and his team are supported by an Investment Committee comprising Calvin Ng, co-founder and Managing Director of Aura Group, and Allan Savins, the Chief Executive Officer of BNK Banking Corporation Limited.
Before joining Aura Group in 2016, Brett spent 11 years with Macquarie Bank’s debt markets business, where he focused on origination, structuring and distributing debt products. He is something of an industry pioneer, known as the first to originate, structure, negotiate and subsequently execute a bank debt facility for an Australian alternative finance lender.
Roger Montgomery, Chairman of Montgomery Investment Management, said, “The low yields that we have experienced over the last decade from fixed interest and term deposit products have seen many investors seek superior risk-adjusted returns that can be found from non-bank lenders. I am delighted that the Aura Core Income Fund provides our retail clients with a fund that aims to provide stable income from the credit asset class and the investment expertise behind the highly successful wholesale-only Aura High Yield SME Fund.”
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