Aura High Yield SME Fund

Aura Group

Aura Group has launched the Aura High Yield SME Fund. The Fund aims to provide a target return of 12% pa from a diversified portfolio of debt securities including asset backed small and medium enterprises (SME) loans, director guaranteed SME loans, and senior loans to alternative finance (AltFi) lenders secured against a loan portfolio that provide regular income and capital stability.

According to Aura Funds Management (the Manager), SME's provide employment to almost 70% of the Australian workforce and account for over half of the output of the private sector, but have more difficulty obtaining funding. Macquarie Bank estimates there is a $70bn underbanked market and Morgan Stanley estimate the market for this lending will grow to $11.4 billion by 2020.

Fintech lenders are using technology to increase the efficiency of SME lending and are targeting niches in the SME lending market but require funds to lend to SME's.

To capture this opportunity, the Manager said: "The Aura High Yield SME Fund invests through leading on-line lending platforms in Australia providing the potential for wholesale investors and family offices to access high returns and a target of capital preservation as part of a smartly diversified portfolio that includes exposure to credit and fixed income investments."

"Our strategy is designed to produce returns that have little or no correlation to public markets, high cash flow and low volatility. The fund will work with Marketplace and peer-to peer lenders who lend to SMEs. The fund will look to purchase notes from SPVs, or units in managed investment schemes that hold the underlying loans originated by the originators. We will also consider other investment methods as the market matures."

"Our investment team has tracked over 20 Australian Fintech platforms and we have completed preliminary due diligence on all those, thus giving investors access to this attractive, fast growing and increasingly complex asset class in a very simple to access fund. We will only work with the originators that meet our investment criteria."

The Fund which launched in August is open for applications. The seed investment is a $20m loan purchase facility with Banjo Loans. The seed capital was predominately provided by the Aura Group and Staff. The Fund is open ended to maximise diversification for investors, with diversification limits triggered at a FUM level of $100m.

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Aura Group is a global financial services business specialising in corporate advisory, funds management and principal investments.