Press Release – Foresight Reaffirms Aura High Yield SME Fund Rating as ‘Very Strong.’

Sydney, 11th April 2024 

Foresight Analytics & Ratings has recently completed its’ ratings assessment of the Aura High Yield SME Fund.

The Fund rating has been rated as VERY STRONG, indicating a very strong level of confidence that the Fund can deliver a risk-adjusted return in line with its investment objectives at this stage of the growth of online lending in Australia. Aura’s support and resourcing, under the strong leadership of Brett Craig, continues to grow and expand, taking advantage of strong tailwinds behind alternative income and private credit investments.

A Foresight Product Complexity Indicator (PCI) for the Aura High Yield SME Fund has also been designated as COMPLEX, which partly reflects the inherent complexity of multiple underlying warehouse vehicles and the multiplicity of parameters that relate to each particular warehouse. It also partly reflects the multiplicity of SME lending verticals, with each vertical having different key performance parameters.

The Aura High Yield SME Fund was launched in August 2017 and is managed by Aura Credit Holdings Pty Ltd. The Fund provides funding to niche (non-bank) lenders that specialise in providing finance to small-to-medium businesses (SMEs) in Australia by way of warehouse financing structures. Within these warehouse facilities, which are typically 3-note structures, the Fund ranks either first or second or a combination of both. The third is the first loss buffer (the Equity Note), contributed by the particular third-party loan originator. Aura has screened over 90 lending platforms since 2017. Growth in lending through these platforms is expected to increase rapidly in the coming years, given an ongoing lack of competitiveness for SME lending from Australian banks, a supportive government and maturity in the self-regulatory efforts of the industry.

In line with this mix of both senior and higher-risk junior positioning in warehouse facilities, the Fund aims to generate a return in excess of the performance benchmark which is the Reserve Bank of Australia Cash Rate + 5% (currently 9.4% p.a.). Since its inception, the Fund has recorded an annualised compound return of 9.6% p.a. with no loss-given-defaults (LGDs). Importantly, investors in the fund have been well rewarded for the level of risk taken.

The Fund currently provides funding to 7 SME lending originators via separate warehouse financing structures. By way of these lending originators, the Fund provides access to a portfolio of over 11,000 loans. Warehouse financing, managed by an adept investment manager (which Aura has proven to be), offers investors a range of substantial protections and benefits over ‘naked’ exposure to SME lending and is by far and away Foresight’s preferred investment structure in which to gain exposure to this fast growing sub-segment of Australian private debt.

Read our disclaimer here. To access to PDF of this press release click here, to access the full ratings report please register here and access it for free.


Unlock Premium Insights:

Register for Foresight 360 Investment Research Platform today!


 

About Foresight Analytics’ Investment Due Diligence Rating (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 Analytics Foresight Complexity Indicator  

A Foresight Complexity Indicator (FCI) 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 riskadjusted 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. 

Picture-1 Press Release | Foresight Reaffirms Aura High Yield SME Fund Rating as ‘Very Strong.’

 

Media Contact – Foresight Analytics

Jay Kumar 

Suite 208, 33 Lexington Drive, Bella Vista, 2153, NSW  

Telephone: 0408266713

Email: jay@foresight-analytics.com

Web: www.foresight-analytics.com

About Foresight Analytics 

Foresight Analytics, an independent Sydney based firm, provides investment diligence, data analytics, assurance 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 includes Research Ratings (Investment, Operational, ESG & Risk), Data Analytics and Advisory. Foresight’s fund strategy solutions include Capability and Process Assurance, bespoke Data Analytics and Strategic Foresight Analysis.

For more information on our capabilities, please visit our website on www.foresight-analytics.com and social media platforms via LinkedIn, Facebook or Twitter.

For additional analyst insights, thematic research and market commentaries, please visit our website on www.foresight-analytics.com and streaming channels YouTube and Podcast.