Mitchell Gunman

Apostle Funds Management (Apostle) has partnered with US-based quantitative investment manager Qtron Investments (Qtron) to deliver Australian wholesale and institutional investors access to its global equity strategies. This marks the first time Qtron is offering its investment strategies to Australian investors, and Apostle will be setting up funds for the wholesale market to access the range of Qtron products.

Founded in 2016, Qtron specialises in emerging market equities, global enhanced equities, global small cap equities, and global long/short equities and has AUM US$1.25 billion*. The firm combines data-driven models with human insight to deliver outperformance.

Apostle’s Managing Director Mitchell Gunman said, “We believe there is a gap in the market for quantitative strategies, and Qtron addresses this by combining a disciplined quantitative approach with active research to ensure portfolios remain adaptive and consistently alpha seeking.

In their investment process, Qtron astutely identifies unique opportunities through diversified, idiosyncratic factor exposures at the stock level, rather than relying on broad sector or country bets. Its strong research culture and team-based process underpin resilient portfolios designed to perform across market cycles, offering Australian investors a differentiated source of potential alpha.”

Qtron Founder and Portfolio Manager Dmitri Kantsyrev said, “We combine a disciplined quantitative framework with qualitative insights to make our models more adaptive and effective. As researchers, we distil intricate data to uncover patterns, and translate complexity into actionable insights to enhance the core of investment decision-making. We are excited to partner with Apostle to bring our strategies to investors across Australia.”

This partnership continues Apostle’s commitment to aligning with specialist global managers who offer alternative, institutional-grade investment strategies, enhancing its ability to deliver both performance and diversification for Australian investors.

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*As at 30 June 2025

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Sub investment grade credit is luring a new cohort of investors, but do they really know what they are buying into?

Allocations to Australian private credit continue to grow, driving new borrowers, asset managers and investors into the market. While there may be a place for Australian private credit in some clients’ portfolios, it is vital that investors understand the risks of such an investment in the face of slick marketing and seductive yields.

While predicting future events is challenging, past lessons can serve as early warnings. The Global Financial Crisis (GFC) highlighted the dangers of excessive risk-taking and inadequate oversight. Similarly, China’s shadow banking sector’s lending to property developers has created financial instability. These incidents underscore the systemic risks of unchecked lending practices. As they say, history rarely repeats itself, but it often rhymes.

The Australian private credit market is showing troubling signs of repeating past mistakes. Firms borrowing from private credit lenders are typically smaller, highly leveraged, and thus riskier than their public market counterparts. These borrowers, like home loan mortgagors, are more vulnerable to interest rate hikes due to the floating rate nature of their loans. With lower free cash flow, the knock-on effect requires them to borrow more, increasing their leverage further. The sector, having never faced a severe economic downturn at its current size and scope, could see a delayed realisation of losses followed by a spike in defaults and large valuation markdowns. Domestically, private credit lenders are made up of a few large institutions and a growing portion from retail funds. This relatively large pool of lending assets (on a global scale) continues to compete for the small pool of domestic borrowers. With all of this in mind, it’s logical to ask what are the known risks, the unknown risks, and how can we identify and quantify them? The past may not return to haunt us, but we must remain aware that it could, even if predicting the trigger and the extent of the fallout is challenging.

Buyer beware: potential risks associated with Australian private credit

1. An unregulated sector

Regulators basically forced banks out of this space as the capital required to be put aside for poorer credit quality loans meant they would never hit their required financial metrics (e.g. ROE). Private lenders are not regulated by APRA, have no RBA oversight (or lender of last resort liquidity) and their loans are not rated by recognised agencies (e.g. S&P, Moody’s). As such, anybody can put up a shingle and seek to attract capital.  Other public debt is subject to comprehensive disclosure requirements, which act as safeguards for investors.

2. No transparency

As private lenders are not regulated, there is nobody looking at what they are doing to protect investors. Investors have no transparency and even if they did, they do not have the resources to assess the validity of the claims the lenders make about the loans they hold. As with the GFC, loan to valuation ratios (LVRs) are only as good as the V, which is not known. The more that competition for loans intensifies, the more the likelihood of credit controls slipping increases, and without transparency or regulation, the risk escalates.

As it stands, covenants are being relaxed in some markets already due to the build-up of money entering the sector (note – there is a large overhang of unplaced capital in the private market), loan documentation is being reduced (down to low doc loans, as in the GFC), loan arrears and delinquencies are rising, and valuations of assets is always variable. It’s very hard to evaluate and manage risks you can’t see.

Private lenders typically value their loans on a “market to model” basis, a system which also applied to lower credit quality debt in the GFC, which Warren Buffett described as “marked to myth”.  It leaves investors subject to significant moral hazard as valuations tend to be subjective and often stale or undertaken intermittently. An example of a practice which can go unnoticed is that of capitalising interest on loans which are non-performing, known as paid-in-kind interest. A borrower which is experiencing difficulties in meeting scheduled payments can have their interest capitalised, hence increasing the credit exposure to the borrower. While this is often accompanied by a punitive interest margin addition for the remainder of the loan, in a concentrated market like Australia, this practice could be going on across a loan portfolio without investors’ knowledge.

Depending on how asset managers disclose their defaults, a build-up of what could otherwise be described as non-performing loans (or defaulting loans) may be occurring without investors’ knowledge. Coupled with subjective valuations, existing investors could be lulled into a false sense of security, not to mention new investors buying units in pooled vehicles at prices above what an arm’s length valuation would suggest. While no data is available on Australian private debt, reports suggest paid-in-kind interest has doubled since 2019 in some areas of private debt in the USA (where better disclosure is available in some segments of the market) as interest rate rises have placed increasing strains on lower credit quality borrowers.

3. Lenders don’t put their own balance sheets at risk

Most private lenders act as agents of their investors and have no principal at risk, so are incentivised to write loans whatever the cost. While any lack of alignment of interest between investors and asset managers is a risk, it is particularly relevant where defensive assets are involved, as investors rely on them for protection.

4. High fees.

As with the above, there is little alignment of interest with investors. Note that headline fees (e.g. investment management fees) are not the only ones many managers collect – they also can be paid loan origination (or establishment) fees by the borrowers, which in Australia can be a significant percentage of the loaned amount. This increases the moral hazard of continuing to lend money to borrowers on terms which are not in investors’ best interests.

5. Lack of liquidity

On top of this, even if investors could foresee a credit event about to occur (i.e. time a trigger point), private credit funds are quite illiquid. As valuations are often stale, unit prices may not fully reflect the true value of the investments. Be wary of those who seek to position low liquidity as low volatility – those who subscribe may discover to their peril that they are two very different things. This also creates a possible further equity issue in that first movers in a concentrated market exiting a fund with inflated unit prices could cause some investors to incur more than their equitable share of losses. As the flow of funds into retail offerings is a means of providing liquidity, in periods of financial stress (when net withdrawals are likely to be occurring into illiquid funds), this situation is only exacerbated. It is perhaps that flow of money into retail offerings which is particularly pertinent – while institutional investors are familiar with less liquid opportunities and are often afforded longer investment time horizons, the inability of retail investors to access their money may come as a rude shock to many.

6. Concentration risk

Diversification becomes more important the riskier the asset set is. Being able to diversify by geography and sector is very important when lending money, as avoiding catastrophes is paramount. Private credit markets generally have a high concentration of exposure to property. In Australia, the issue is intensified as we have only two major property markets (Sydney and Melbourne), which is where the majority of the loan exposure occurs. We also have a small cap economy, so the breadth of industry is small to which loans are being forwarded. Concentration risk is an ever-present issue in Australia and investors could be exposed on many levels through the same entity (e.g. holdings in REITS, corporate bonds issued by those REITs and then private loans to the same REITs). While many asset managers suggest they are diversified by number of loans in a portfolio, the fact is that concentration risk exists as the loans may be to borrowers in the same sector or against the security of property in the same city. While on the face of it this may sound well diversified, no insurer covering property damage to 300 homes in Miami Florida would say they are well diversified as one weather event, for example a hurricane, could cause catastrophic loss.

As more monies flood into the sector, loans have also increasingly been lent to developers, up to 60% in some cases. Development is very much at the riskier end of the property spectrum, including potentially highly leveraged exposure to land banks. In a scenario where a loan to a developer becomes impaired it is often hard to find a buyer to take on an unfinished project, with other developers often unwilling to take on half built developments with unknown risks or quality issues. So, while it may be secured, the asset may be worth far less than assumed even with much touted 40% safety margins and insolvency laws.

7. The paradox of the false promise

A further disturbing feature of private credit is the near risk-free return being marketed – 11% style yields, no volatility of unit prices and very high security (as they are lending on a senior secured basis). As borrowers are increasingly property developers (which is the riskier end of the security chain), this should raise red As more money enters the system attracted by the riches being proposed, it seems inevitable that more risk will be required to be taken to keep returns high (as occurred in the GFC). This could be in the form of lower credit quality and/or leverage, neither of which is a beneficial set of circumstances for investors. Recent experience suggests the volume of money chasing available loans is impacting materially on unleveraged yields available. Increased competition from public markets is also attracting higher quality borrowers (due to significantly lower interest rates being charged) placing increasing pressure on private lenders.

Leverage comes in many forms and often congregates in stress across a financial system. Loans to highly leveraged borrowers, where leverage is used in one or many components of a financial structure (e.g. interfund exposure when a fund invests in a leveraged fund managed by the same asset manager), could create a systemic financial problem in times of stress. An example of this could be a leveraged fund receiving margin calls from its lender (e.g. a bank) at the same time the highly leveraged borrower is running into cash flow problems. Not only are the fund and borrower facing financial strains, but the lending bank could also be experiencing stress, which in turn impacts its ability to lend, so credit dries up across a financial system. Investors in the private credit fund could experience financial stress on many levels in such a situation.

In summary, there are clear risks in investing in Australian private credit – risks that are often not given the same prominence as the lure of high yields. As acknowledged at the outset, not all private credit is bad – it may play a useful role in a diversified portfolio. However, its use should be metered and proportionate to the level of risk the investor is willing to take. As discussed, evaluating that risk is hard especially when there is a lack of transparency, and it can’t be quantified. To assist investors, we have put together five questions that investors should ask before investing in private credit funds in Australia.

Investor checklist: Five questions you must ask your private credit manager

1. Who is your manager looking after?

Unlike banks, there is no balance sheet risk for managers who arrange private credit – the investor bears all the credit risk. Fees come in many forms when it comes to Private Credit.  In some cases, managers are paid an arranger fee for bringing an investor and a borrower together.  Is this part of your return?  So how does the manager align their interests with clients? Does the manager co-invest alongside clients? All investment products involve the charging of fees and accrual of costs; as always, the focus should be on how transparent those fees and costs are and are they appropriate – for Australian private credit funds, those fees and costs can amount to over 2% before performance fees are accounted for. Where possible, apples-to-apples comparison of fees and costs should be sought to ensure they are comparable and fair.

2. What is the revaluation process?

As highlighted, an apparent lack of volatility can reflect a lack of regular pricing rather than an indication of low risk. Where a new price is issued, but it is based on out-of-date valuations that do not necessarily reflect current market conditions or loan health, you should ask the manager how often they revalue the portfolio and who does the revaluation.  Be aware that standards around regular and independent valuations in Australia are below those of many international markets. Investors may be left unaware of problems brewing in the portfolio, potentially leaving them dangerously exposed to building risks.

3. Can they provide a workout scenario case study for when a loan breached its covenants or defaulted?

Sometimes things go wrong, so the test is how was the issue identified, how did the manager act to protect investors and how was this communicated to investors? Ask your manager for an example of how they identified an impaired loan and how and when was that reported to investors. Was the loan restructured and assuming the loan was secured, did other lenders have security against the same assets? Has the manager ever written off a loan and if so, what percentage of loans in the portfolio have breached their covenants, been restructured or written off entirely over the last 12 months.

4. How much of their portfolio is exposed to property and how much is lent to developers?

Ask to see a breakdown of the portfolio’s exposure. It is unlikely you will be provided a full list of each loan, but a manager should be willing to provide a breakdown of the loan characteristics by sector and geography. Is the manager willing to share the average loan rating, the type of property or development the loan is issued against and in which geographical market? How many names is the book spread across and what is the average time to maturity. In theory, diversification should help to spread risk.

5. How quickly and easily can you exit the Fund, considering its liquidity profile and gating mechanisms?

In most cases investors should be able to freely transact in and out of the fund as required per the terms in the PDS. Here we are seeking to identify some of the potential risks, to help ensure investors can fully evaluate them when deciding how much of their capital to commit. If there was to be a market event, or realisation of one of the potential risks highlighted, liquidity may become a significant issue. First, how liquid is the Fund in normal times; i.e. how often does the Fund process redemption requests and are there any limits? Second, should a large investor seek to redeem, are there mechanisms in place to ensure other unitholders are not adversely impacted as a result? These impacts may be from changes to the portfolio and/or realisation of gains. In times of stress most private credit funds will have the ability to gate redemption requests. This means they will stack up requests and allow a portion of requests to be met at set intervals. In such cases, it may be months or even years before investors are fully able to redeem their investment. The details will be in the PDS, and it is important to understand what redemption conditions may be applied and to seek clarity if required.

Does private credit meet your clients’ needs?

Acknowledging that private credit can provide a useful role in portfolios, consider the following when assessing sub investment grade opportunities:

1. Going global – provides geographical diversification
2. Consider bank loans – a regulated space
3. Infrastructure bonds – enhanced liquidity
4. Bigger, broader markets – provides sector and issuer diversification
5. Tactical tailwinds – exposure to long term trends e.g. energy transition, aged healthcare
6. Manager tenure – look for experience and track record

Investing in sub-investment grade debt requires a more hands-on approach than investing in investment grade debt, and expertise is essential. This requires good analysis before and during the term of a loan or debt, as well as remediating the situation should things not go as planned.

Given the idiosyncratic nature of private debt, while investing in larger and broader markets (like USA) is a worthwhile first step, it is not a panacea for success. Many experienced Australian investors have not realised their expected outcomes in overseas markets, so having structures in place to avoid bad credit events or recover large proportions of their capital if not, will weigh the odds heavily in investors’ favour.  Engaging local specialist lenders, who are experts in specific markets (so know the industry and players intimately), provide the parameters to constrain the risks inherent in this segment of the market.

While the headline yield may not be as attractive, building a well-diversified portfolio with daily liquidity may ultimately provide investors with much better risk adjusted returns. With banks and asset managers beginning to flag these risks, investors would be well served to be cautious. Betting big on Australian private credit may regrettably become a gamble rather than an investment.

By Tony Breen, Investment Specialist, Credit 

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Notes:

Apostle Funds Management Pty Limited ABN 16 129 922 612 AFSL No. 45 83 75 (“Apostle”). The attached or accompanying document or information has been issued by Apostle and includes information from third parties. The third parties may include Investment Managers who conduct any portfolio management activities in and from overseas countries and who may be exempt from the requirement to hold an AFSL under the Corporations Act 2001 (Cth) in respect of financial services. These third parties are regulated by the relevant authorities in their country under laws which differ from Australian laws. This material is for information purposes only. It is not an offer or a recommendation to invest and should not be relied upon by investors in making an investment decision. Offers to invest will only be made in the relevant offer document and this material is not intended to substitute for suitable disclosure documents which will outline the risks involved and other relevant information. Any investment carries potential risks and fees which are described in the relevant offer document. An investor should, before deciding whether to invest, consider the appropriateness of the investment, having regard to both the relevant offer document in its entirety and the investor’s objectives, financial situation and need. This information may not have been prepared taking into account your objectives, financial situation or needs. Please note that past investment performance is not a reliable indicator of future investment performance. No representation is made as to future performance or volatility of the investment. In particular, there is no guarantee that the investment objectives and investment strategy set out in this presentation may be successful.  Any forward-looking statements, opinions and estimates provided in this material are based on assumptions and contingencies which are subject to change without notice and should not be relied upon as an indication of the future performance.  Persons should rely solely upon their own investigations in respect of the subject matter discussed in this material. No representations or warranties, express or implied, are made as to the accuracy or completeness of the information, opinions and conclusions contained in this material.  In preparing these materials, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available to Apostle. To the extent permitted by law, all liability in reliance on this material is expressly disclaimed. This document is strictly confidential and is intended solely for the use of the person to whom it has been delivered. It may not be reproduced, distributed or published, in whole or in part, without the prior approval of Apostle. This material is provided in relation to an investment that is available exclusively to wholesale clients, as defined by the Corporations Act 2001 (Cth). This material is provided in relation to an investment that is open to Australian residents only and is not available in any jurisdiction in which, or to any person to whom, it would be unlawful to make such offer or invitation.

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John Barrasso

Apostle Funds Management (Apostle) has announced the appointment of John Barrasso to the role of Portfolio Manager – Credit.

Mr Barrasso will work in Apostle’s investment team on the credit strategies. As an accomplished fixed income specialist, Mr Barrasso brings over two decades of experience in credit investments, risk and portfolio management to the boutique fund manager.

Prior to joining Apostle, Mr Barrasso was Fixed Income Portfolio Manager at First Sentier Investors spearheading the construction and management of multi-asset fixed income portfolios. Within this capacity he was focused on generating alpha by leveraging macro market themes and fundamentals, driving top-quartile fund performance over a 5-year period. He also contributed to the development of ESG frameworks for sovereign and semi-government entities.

Mr Barrasso’s experience includes senior trading positions at JP Morgan, Nomura, and Lloyds Treasury, where he demonstrated leadership in risk management, pricing, and execution across diversified fixed income strategies and cross-currency products.

Apostle’s Director, Mitchell Gunman said, “With growing demand for global credit strategies, we are pleased to welcome John to our team. Apostle partners with best-of-breed credit managers offshore to custom build strategies for the Australian marketplace, so John’s role will be to assist with manager selection, managing liquidity, interest rate and currency hedging as well as product design. John’s expertise in multi-asset fixed income portfolios and driving performance will be a considerable asset to our business.”

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Mr James will support Kimon Kouryialas Director, Head of Global Distribution in the delivery of Apostle’s investment solutions. He will facilitate the distribution of strategies, giving investors access to a range of investments in credit, thematic investments, alternative debt and equity, private credit, Venture Capital, timberland and global equities.

With over twenty-five years’ experience in the investment and wealth management industry, Mr James brings expertise across distribution, marketing and client services. He was most recently General Manager, Head of Distribution at Lakehouse Capital where he established the firms wholesale presence in Australia while maintaining the retail business arm. Prior to his role at the boutique firm he dedicated over two decades to Aberdeen Standard Investments, serving across multiply roles with the global investment manager, leaving as Director, Head of Marketing and Business Strategy.

Mr Kouryialas said, “We are pleased to welcome Stuart to the team to help lead the firm’s expansion. He brings a network of strong relationships and has a proven track record of implementing strategies across a range of functions to drive growth.

The market has shifted, and investors are seeking a range of sophisticated strategies to build robust portfolios for wealth preservation and to generate alpha with global exposure. We have partnered with outstanding global fund managers, to provide access to a variety of solutions across asset classes to meet investor’s needs. Stuart’s experience and expertise within the wholesale space will be pivotal as we continue our global distribution strategy.”

Apostle’s Managing Director Karyn West said, “Stuart’s appointment will support our growth as we continue to expand our footprint within the wholesale sector across Australia and New Zealand. We are seeing increasing investor demand for differentiated investment strategies to diversify portfolios within the institutional and wholesale market. Stuart’s experience across both markets will be critical as we continue to deliver bespoke solutions to clients.”

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Karyn West

Apostle Funds Management (Apostle) has announced the launch of its impact report for the People & Planet Diversified Fund.

The Apostle People and Planet Diversified Fund (APPDF) launched in April 2022 and has outperformed both the market index and the median return for balanced superannuation options. The Fund has 67.66% Carbon footprint lower than benchmark^[1] and 14.18% greater female representation compared to the benchmark^[2], whilst achieving returns of 10.56% in FY23.

Walking the walk on gender equality

Apostle prioritises investments with a focus on advancing gender equality through active ownership and as a member of 40:40 Vision. The Fund also excludes investments that are underperforming its gender equality benchmark tilting the strategies towards those that are outperforming.

While there has been a gradual increase in the representation of women in senior management roles globally, women continue to be significantly underrepresented in Executive Leadership Teams (ELTs) across the ASX300.

According to the 2023 Chief Executive Women Census, companies that have set a 40:40 or better target are three times more likely to achieve gender balance within their ELT compared to companies without such targets. Despite this compelling evidence, 36% of ASX companies have not yet set gender composition targets for their ELT, and an additional 24% have set a target that falls short of the 40:40 benchmark.

The latest Workplace Gender Equality Agency (WGEA) Scorecard for 2023, reported that Australia’s gender pay gap reached a new low of 21.7 per cent. The significant decrease from the 2022 Scorecard means that on average, men earn just over a fifth more than women. This represents the largest single-year reduction in almost a decade, although women still earn considerably less than their male counterparts.

Kylie Parkyn, Apostle’s Portfolio Manager, Sustainable Investment, said, “Our approach to active ownership ensures that our engagement and voting decisions are geared towards addressing pay and leadership inequalities, accelerating the performance objectives of the Sustainable Development Goals (SDGs). While the WGEA Scorecard results are encouraging. We acknowledge that there is still work to be done in order to promote more women into leadership roles.”

Apostle is an Australian-owned, and female-led fund manager. Apostles’ overall workforce is gender balanced with over 40% female representation in the company, its investment team is 50% female and ensures equal pay for equal work between male and female employees.

Ms Parkyn continued, “At Apostle we are firm believers in advocating for gender equality in our investments and embodying it within our own business. We are proud to be a female led Funds Management business and maintain a gender-balanced workforce, with women making up over 40% of our team. We are committed to ensuring equal pay for equal work among our male and female employees. We expect this same standard of the businesses we invest in with our Fund.”

The power of proxy voting for impact

Apostle demonstrated its commitment to climate-related issues by supporting all shareholder proposals that promoted long-term shareholder value in 2022. The firm also took a firm stance on board diversity, opposing 41% of director elections where the board did not include at least 40% representation from underrepresented gender identities. Opposing 59% of director elections where the board lacked at least 20% representation from racially or ethnically diverse directors.

Apostle’s Managing Director Karyn West said, “Capital markets have an important role to play in scaling business solutions that address the Sustainable Development Goals, specifically relating to the climate and increasing gender diversity.

In our first Impact report, we wanted to share how we think about impactful investment, our approach and highlight some of the work we are proud of, areas where we have achieved impactful ‘performance’ and areas where we would like to move the dial and enhance our efforts.

We are committed to connecting pools of capital with the problems facing the world today. It not only makes ethical sense but also directs investments into real growth opportunities which supports our clients objectives.”

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Kimon Kouryialas

Apostle Funds Management (Apostle) bolsters its senior leadership capability, appointing Kimon Kouryialas as Director, Head of Global Distribution commencing early October.

The newly created role will see Mr Kouryialas lead Apostle’s global distribution strategy.

Mr Kouryialas will be responsible for supporting the delivery of Apostle’s three ethical solutions, Apostle’s Carbon Credit Fund, People & Planet Diversified Fund and Ethical Global Credit Fund. Along with the high-quality offerings from its partnerships with external managers.

Mr Kouryialas joins Apostle from Martin Currie where he held the position Co-Head of Global Distribution. Within this role he was responsible for sales and client-services activity across Australia, Asia and Middle East.

Throughout his 15-year tenure at the global fund manager he was instrumental in developing the growth of the business within Australia and built its presence within the APAC region. Prior to his time at Martin Currie, Mr Kouryialas was Managing Director and Head of Distribution at Legg Mason Asset Management, leading the business strategy for Australia.

Apostle’s Managing Director Karyn West said, “We are thrilled to have Kimon on board to lead our global distribution strategy. Kimon has a valued reputation within industry and a demonstrated track record of building successful fund management businesses over his twenty-five-year career in finance.

As we continue to expand our offering for institutional and wholesale investors throughout Asia and the Middle East, Kimon’s experience will play a key role in delivering our strategies to these regions. He understands the needs of investors, knows how to communicate effectively and is a problem solver – all qualities that make him an excellent fit to help lead our next phase of growth.”

Commenting on the appointment, Mr Kouryialas said, “I am pleased to be joining Apostle during this growth period, as the demand for ethical and impact strategies continue, Apostle is well positioned to deliver high quality strategies that meet the changing needs of investors.

Apostle’s offering is exceptional and differentiated for the Australian marketplace and I am excited by the potential to develop the business further. The business has partnered with exceptional global fund managers with bespoke offerings to find solutions across a range of asset classes for Australian investors. While also having three unique strategies developed in house to offer diversification for clients. I also look forward to help build out Apostle’s internal capabilities as the business continues to develop.

Our expansion into the Asian and Middle Eastern markets holds great promise, especially as investors actively seek partnerships with experienced and trusted managers.”

Mr Kouryialas is an experienced financial services professional having held roles across global financial institutions such as Citigroup, JP Morgan Asset Management, State Street Australia and Barclays Bank. He also holds a Bachelor of Business (major in economics) and a post graduate diploma in finance.

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Karyn West

Apostle Funds Management (Apostle) has announced its partnership with US venture capital Fund Safar Partners (Safar).

Safar invests in early-stage companies developed at leading universities Harvard, MIT and Rochester to address today’s biggest challenges. It invests one third of its capital in early-stage companies, with two thirds reserved to support companies through their successful growth stages.

With US$620 million assets under management^[1] the partnership offers Australian wholesale and institutional investors access to a diversified Fund focusing on healthcare, AI and IT and clean tech.

Fund I was launched in May 2019 with US$287 million in commitments and has since completed 34 deals. Fund I is now closed, Fund II is closing, and Fund III is expected to enter the market later this year. Safar targets a return multiple of over 4x on invested capital and a net IRR of over 20%.

Safar has multidisciplinary expertise on their Scientific and Business Advisory Boards to assist the thirteen-person investment team with strategic advice to help scale and grow portfolio companies.

The board is comprised of scholars and experts from Harvard, MIT, and the University of Rochester who are committed to seeing a more efficient technology transfer and faster scaling of ideas that will change the world.

Speaking on the partnership Apostle’s Managing Director Karyn West said, “We are excited to be working with a group that partners with the best universities in the world, to solve the most urgent problems facing the world. We have had a long-standing relationship with Safar’s Managing Partner Nader Motamedy beginning over 20 years ago, and we believe in its ethos and investment strategy.

For example, Safar invests in one of the leading companies in fusion in the world. Commonwealth Fusion Systems is an energy company aiming to commercialise fusion energy production to take advantage of the extraordinary market opportunity for carbon free power. This is a tangible, quality, impactful investment opportunity which we can now offer Australian investors.

At Apostle, we are committed to connecting pools of capital with the problems that face our economy and partnering with aligned managers like Safar who have deep sector expertise to deliver is critical to our mission.”

Safar’s Managing Partner, Arunas Chesonis said, “Our flexible strategy allows us to take technologies from inception to global scale. With access to the most promising technologies developed by the brightest minds, we are often one of the first investors in our portfolio companies, helping them grow and achieve technological and financial success. We are excited to partner with Apostle to bring our offering to Australian investors.”

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Karyn West

Apostle Funds Management (Apostle) has announced the launch of its Global Carbon Credit Fund (the Fund).

The Fund offers exposure to global carbon markets for sophisticated and institutional investors and will seek to outperform a global carbon benchmark by at least 2% p.a. net of fees over rolling 5-year periods.

Apostle’s Partner, Global Carbon Markets Luke Donovan explained, “Apostle’s Global Carbon Credit Fund offers sophisticated investors the opportunity to take an active role in the global decarbonisation, now. We are pleased to bring this solution to the market amid extensive investor demand.”

“Compliance Carbon markets have a strong outlook and are an essential component of a low-emission economy. These markets are regulated and mandated by governments worldwide, with oversight and control mechanisms in place to ensure integrity and scalability. Our fund provides a robust return outlook and diversification with other asset classes while also serving as a hedge against climate risk and inflation,” said Mr Donovan.

Taking an institutional approach to carbon markets

The wholesale unregistered Fund is actively managed with diversification across major markets – California, Europe, UK, New Zealand and Australia. This approach offers investors holistic exposure to the carbon price and helps reduce volatility through jurisdictional diversification.

The Apostle Carbon Credit Fund benchmark provides investors with beta carbon price exposure to both established and emerging carbon markets. This is combined with an active management component that delivers greater opportunity for alpha and provides superior returns at a lower risk. The Fund is constructed using a mixture of physical credits and futures.

“We believe a ton of carbon is a ton of carbon – regardless of the country it is from. This is why we’ve chosen the breadth of markets and why the benchmark is constructed with even distribution across each market.

It’s clear that in order to incentivise the type of transition needed in our economy the price of carbon needs to be higher. Institutional investors have an important role to play in this process, by participating in compliance carbon markets they increase liquidity and sophistication which ultimately drives greater price discovery. High functioning compliance carbon markets are a key pillar to the efficient and timely allocation of capital in the race to reduce emissions in our economy. This is what we are offering.”

Mr Donovan has over 15 years of deep expertise within the energy finance sector and carbon trading. He was most recently Executive Director of Carbon and Power Markets at Commonwealth Bank of Australia (CBA) where he was responsible for CBA’s Carbon Emissions trading globally and pivotal to establishing its presence in the Australian Carbon Market. Prior to his time with the bank he experienced a decade tenure at Origin Energy, building Australia’s largest industrial customer portfolio in energy and carbon trading.

Not all credits are created equal

Voluntary carbon offsets are unregulated which means transparency and scale is likely to take much longer to develop, unlike compliance markets which are regulated by governments.

Regulators use control mechanisms to increase this price over time, which disincentivises emissions in line with their climate goals. Each country operates its own mechanism, but it is expected that carbon prices will converge over time to create a global cost of carbon.

Developing an agreed infrastructure and pricing in Australia will set the investment guidelines for the highest emitters and deliver confidence to investors. By establishing markets and setting a price on carbon like a commodity it will incentivise large polluters to make the changes to their business.

Commenting on Australia’s fledgling carbon market Mr Donovan explained, “The safeguard mechanism offers a clear signal to market to deploy capital to smooth the transition. Most corporates understand a carbon tax is coming, the most efficient way forward is to establish a robust price for carbon to enable investors to make informed decisions to deploy capital.

Climate change is a global problem and over time it would make sense for fungibility between carbon markets to increase which will ultimately lead to price convergence and the lowest cost of abatement occurring.”

“We are not putting money into increasing the profitability of these high emitters, we are participating in the mechanism that permits these businesses to change how they operate to decarbonise. But we must start deploying capital now to create integrity in the market, liquidity, price transparency, and price discovery.”

Apostle’s Managing Director Karyn West commented on the launch, “This fund has been a long time in the making and complements our other ethical investment strategies. Connecting pools of capital with the problems that face our economy is critical to progress and is core to our business, which is why we are pleased to bring this Fund to market.”

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The new addition bolsters Apostle’s leadership in the impact, ethical and net zero space ahead of the launch of its Global Carbon Credit fund.

AFM’s Managing Director Karyn West said, “We are thrilled to welcome Luke and his strong leadership to the Apostle team. Luke’s rare technical skill set and deep sector expertise with global carbon markets is critical to our strategic positioning in providing solutions to our clients.”

Mr Donovan joins Apostle with over 15 years’ experience in the energy finance sector. His extensive experience began with his decade tenure at Origin Energy, building Australia’s largest industrial customer portfolio in energy and carbon trading.

Mr Donovan was most recently Executive Director of Carbon and Power Markets at Commonwealth Bank of Australia (CBA). Where he was responsible for CBA’s Carbon Emissions trading globally and pivotal to establishing its presence in the Australian Carbon Market.

Speaking on his appointment Mr Donovan said, “I was seeking to partner with a fund distribution and product management group that could support the creation of products relevant to this market amid shifting demand. Apostle is a great natural fit, I welcome a collaborative partnership in delivering sophisticated products and services to the institutional market in global carbon markets.

I look forward to working together with Apostle and believe we can provide uniquely positioned alpha oriented products to meet the demands of institutional markets.”

Building on the appointments of its first Chief Operations Officer Eric Chu and ESG advisor Kylie Parkyn this year, the announcement reinforces Apostle’s growing investment product suite following the launch of its People and Planet fund and Ethical High Yield Credit Fund.

Ms West continues, “We have the right expertise and the right products to deliver institutional grade ethical and impact strategies for our clients. We have seen an enormous shift in demand from clients and we felt there was a limited selection in the market to meet new sustainable requirements.

This is why we have curated a team of specialists to support our holistic investment strategy. We are focused on the future of investing and believe you can create positive real-world outcomes without sacrificing financial returns.”

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Karyn West

Apostle Funds Management (AFM) has announced the launch of its ethically screened high yield credit Fund (the Fund).

The Fund is accessible to wholesale investors and adds to the boutique manager’s stable of ethical and impact strategies, following the launch of its Apostle People and Planet Diversified Fund in April.

AFM have designed the portfolio the be an all-weather Fund that allows it to adjust to the current interest rate and inflationary environment. The Fund focuses on generating a stable income along with capital preservation.

AFM’s Managing Director Karyn West says, “This Fund is designed for investors who are seeking a good total return of 5-7% with characteristics that lessen the impact of rising rates and assist in higher inflationary periods. With our ethical screening it will be suitable for many investors, including those who have environmental concerns, for charities, endowments and religious organisations.”

The Fund provides exposure to US alternative fixed income assets for wholesale investors by investing in experienced managers that have exemplary track records in niche areas such as liquid infrastructure credit and private real estate debt.

AFM’s Portfolio Manager Steven Spearing explains, “Fixed income as an asset class is well positioned to provide stability and capital preservation. There are good quality sub-investment grade bonds trading at historically cheap levels, and we see this as a fantastic opportunity to be entering the market with a new credit Fund.

The Fund can navigate a variety of market conditions using a mix of fixed and floating rate instruments, and a mix of high yield fixed income assets (loans, bonds, private credit). Expected returns are in line with the high yield credit market but it is inherently more ‘defensive’ through its allocation to senior loans, infrastructure debt and private credit.”

Steven continues, “As an actively managed Fund we are able to adjust the portfolio to suit the economic environment. The underlying Fund managers that the Fund invests in are also well positioned to navigate the economic challenges that lie ahead and take advantage of the recent sell off in bond markets.

The Fund has been constructed to have lower volatility and better defensive characteristics than the broader high yield market, leading to better risk adjusted returns over the medium-to-long-term. This leaves us well positioned as we face a likely global recession.”

The Fund is ethically screened, diversified and alternative high yield credit with a target yield of 5-7% net of fees p. a. over rolling 5-year periods. The Fund is daily priced, liquid and hedged into AUD.

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