Sydney, 25th January 2023 – Foresight Analytics’ rates Aura Core Income Fund as ‘Very Strong’
Foresight Analytics & Ratings has recently completed a ratings assessment of the Aura Core Income Fund (ACIF). The fund rating has been assigned as VERY STRONG, indicating a strong conviction that the fund can deliver a risk-adjusted return in line with its investment objectives. The investment manager’s support for this strategy is experienced and well-resourced.
The Foresight Product Complexity Indicator (PCI) for the ACIF is COMPLEX, indicating that the investment manager will seek to outperform their chosen specialist market sector, in this case, the Australian SME loan market. A key risk is the ability of Aura to identify and validate superior loan underwriting and servicing standards of non-bank lenders with experience in the SME sector.
The ACIF was launched in September 2022 and is managed by Aura Funds Management Pty. Ltd. ACIF provides funding to select niche (non-bank) lenders specialising in providing finance to small-to-medium businesses (SMEs) in Australia by way of warehouse financing structures. Within these facilities, which are tranched structures, the Fund will typically rank highest rank / lowest risk as well as having a lesser portion of the total portfolio in the 2nd rank, subordinated level of credit. In line with this lower risk position in warehouse facilities, the ACIF aims to offer a monthly income 3.5% – 5.5% p.a. above the RBA Cash Rate (net of fees) with a low level of expected capital loss. At the current Cash Rate of 3.1%, this equates to an annualised return of 6.6 – 8.8%.
The ACIF is part of The Aura Group. The Aura Group has offices in Sydney, Melbourne, Brisbane, Vietnam and Singapore. The businesses of Aura Group include corporate and capital market advisory, venture capital, funds management, wealth management services and the provision of accounting services to clients. Aura Funds Management launched its first unlisted unit trust in August 2017, the Aura High Yield SME Fund (AHYSMEF), a wholesale only SME financing via warehouse financing structures. Drawing and leveraging on the experience of AHYSMEF, which recorded an excellent track-record to date, the Manager launched the retail investor eligible the Aura Core Income (ACIF) in September 2022.
Foresight Analytics’ analyst Rodney Lay commented “The ACIF aims to provide stable monthly income returns from a diversified portfolio of debt securities including asset-backed SME loans, director guaranteed SME loans as well as senior and subordinated loans to non-bank lenders secured against a loan portfolio that provides regular income and capability stability.”
He further added, “Though recently launched, the ACIF already provides funding to 3 warehouse financing structures that, in turn, provide funding to 3 niche SME lenders, providing access to a portfolio of close to 9,000 loans. This rapid investment was achieved by leveraging the investment due diligence the Manager had previously undertaken for the higher-risk Aura High Yield SME Fund.”
The ACIF is a relatively unique offering, and more so for retail investors. Through the experience and expertise of the Manager, which have an optimal background for the provision of warehouse financing, it seeks to enable investors to capitalise on an increasingly important source of private credit to SME borrowers.
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About Foresight Analytics’ Investment Due Diligence (IDD) Rating
The objective of Foresight Analytics’ Investment Due Diligence Rating (IDD Rating) is to identify the best funds and opportunities for future investment. We assess the fund’s historical risk-adjusted performance – compared to its peers – to form a holistic view of the manager’s ability to deliver future returns. The IDD rating indicates the quality of the investment option within the context of a diversified portfolio and full investment cycle. Foresight’s analysts use a 5-point scale to determine how the fund will perform against a range of risk factors.
- SUPERIOR indicates the highest level of confidence that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is highly suitable for inclusion on APLs.
- VERY STRONG indicates a very strong conviction that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is suitable for inclusion on most APLs.
- STRONG indicates a strong likelihood that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is suitable for inclusion on most APLs.
- COMPETENT indicates the fund may deliver a risk-adjusted return in line with its relevant benchmark and that it may be suitable for APLs.
- WEAK indicates the fund is unlikely to deliver a risk-adjusted return in line with its investment objective and that it is not suitable for most APLs.
A ‘Hold’ designation is applied to a fund’s rating if a material change impacts the fund manager, and we need to review the rating. A ‘Sell’ designation indicates the Foresight Investment Ratings Committee considers risk factors to be elevated enough that maintaining an investment in the fund as part of their diversified portfolio is questionable.
Foresight Product Complexity Indicator (PCI)
A Foresight Product Complexity Indicator (PCI) highlights the complexity of an investment product based on a range of indicators. These typically include its terms and conditions, performance-based fees, liquidity structure, financial leverage, use of derivatives, rare and niche asset class/opportunity set, currency exposure and the level of transparency offered for investors. Foresight believes these factors can disproportionately affect risk-adjusted return outcomes for investors even if a manager is very skilled. Investors can use FCI as a guide to portfolio position sizing within a diversified portfolio context.
Media Contact – Foresight Analytics
Rodney Lay, Analyst
Suite 208, 33 Lexington Drive, Bella Vista, 2153, NSW
Telephone: 0435 610 293/ 02 8883 1369
About Foresight Analytics
Foresight Analytics, an independent Sydney-based firm, provides investment diligence, data analytics, and advisory solutions to leading investment management companies, superannuation funds and wealth groups across the Asia Pacific. Foresight’s innovative, evidence-based approach blends both human and forensic insights to provide a range of analytical, predictive and market intelligence solutions to investors. Foresight Analytics was founded in 2015 by Jay Kumar, a former executive of Morningstar, Optimix Investment Management, ANZ Wealth & Private Bank and the Reserve Bank of Fiji.
Foresight’s fiduciary solutions include Diligence Services (Investment, Operational, ESG & Risk Diligence), Data Analytics and Asset Consulting. Foresight’s fund strategy solutions include Data Analytics for asset managers, Fund Strategy Benchmarking Solutions and Strategic Research.
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