Stefan Nilsson, editor of Hedge Funds Club, interviews Calvin Ng, Managing Director of Aura Group.
The Hedge Funds Club, founded by Stefan Nilsson in 2005, has grown into Asia’s largest network for hedge fund managers and investors. Their mission is to promote the hedge fund industry in Asia and help it grow by connecting investors and hedge fund managers through networking events in Tokyo, Singapore and Hong Kong.
The Hedge Funds Club’s founder, Stefan Nilsson, is also the CEO of HFC Advisory Group in Tokyo, an advisory business active in the alternative investments and natural resources industries. Additionally, he is a director of Terrasias Capital, a single-family office focused on alternative investments. Earlier in his career, he managed the Tokyo marketing and research office of a global macro hedge fund firm and worked in prime brokerage and asset management at JP Morgan and Bear Stearns.
The two discuss the role of technology in investment management, the opportunities in private credit, the impact of the global pandemic and Singapore as a financial hub.
Calvin: Aura Group is a fast-growing fund and wealth manager that specialises in venture capital, private equity and private debt in Asia-Pacific. We are a team of 85 people managing and advising approximately A$800m with operations in Singapore, Australia and Vietnam. Because of these specialisations, in particular venture capital, we are lucky enough to meet thousands of entrepreneurs and businesses every year which give us a unique lens on how the world is changing around us. Live data from our many portfolio companies give us a real finger on the pulse of disruption and technology adoption. We take this data and learnings and combine it with data from more traditional sources to produce proprietary screening tools and research, which we use across the business.
Calvin: Aura Group has a strong background in investing in private credit. With traditional fixed income yields at all-time lows and in some cases negative, we believe private credit currently has one of the best risk-reward ratios in the market and is well placed to continue to outperform relative to bonds for the foreseeable future. In private credit, Aura Group currently manages numerous funds including the Aura High SME Yield Fund which provides exposure to SME credit originated by fintech lenders. This strategy has 3.4 years of track record, returning 9.24% in the last 12 months and 38.06% since inception with nil losses. Aura Group also manages the Aura Property Credit Fund which provides senior mortgage finance against real estate. This strategy has 4 years of track record returning 8.14% in the last 12 months and 43.57% since inception with nil losses. Both funds have navigated the crisis exceptionally well.
Calvin: The pandemic turned out to be a great test of our investment thesis, risk management and most importantly communication skills. Our team really banded together during the lockdown to assist portfolio companies and founders navigate the crisis. Communication became our number one priority and at the time we thought we may be over-communicating, but we have since received the feedback that it was exactly what investors wanted. To assist our investors with liquidity we made a group-wide decision not to call any committed capital during the lockdowns and where possible return capital. We returned over A$100m in capital, profits and income in 2020. As we couldn’t travel, we invested heavily in our digital capabilities and content strategy. To our surprise we had material inflows into our private credit strategies during the lockdowns, partially supported by reductions in interest rates globally. We also achieved first close on two new venture capital funds, TNB Aura Fund II, our South East Asia-focused VC fund and Aura Venture Fund II, our Australia-focused VC fund. To take advantage of market dislocations we launched the Aura Tactical Opportunities Fund a special-situations fund in August 2020 and so are preparing for an interesting year of capital deployment.
Calvin: The consensus is betting on a vaccine-led recovery, which may already be priced into the stock market. However, we need to remember that the stock market is not an accurate reflection of the real economy as it is made of larger businesses with generally better access to financing. E-commerce and technology adoption will continue to have accelerating tailwinds due to structural shifts to flexible workplaces and home entertainment. Real estate, retail, hospitality and travel all still face headwinds, especially in the SME sector. Someone once said never let a good crisis go to waste. As the pandemic has and continues to cause mispricings in the market, we will continue to hunt for good businesses at bargain prices, especially in the mid-market. If you look at historical private equity returns, vintages in the early years following the crisis tend to outperform so we will be very busy this year putting sourcing and analysing opportunities to put capital to work
Calvin: Predominantly because of the economic growth potential of the South East Asian region which we envisage will continue to be supercharged by internet and technology adoption. Singapore is a world-class financial centre right in the epicentre of the fastest-growing region in the world. The Singaporean government has consistently implemented visionary policies that have strongly supported trade, innovation and investment. We are lucky to have been a beneficiary of these policies as an approved co-investment partner of Enterprise Singapore. Singapore is also likely to benefit from structural and regulatory changes in Hong Kong and other offshore financial centres like Cayman and BVI. We are so bullish on the eco-system here, so much so that we re-domiciled Aura Group and moved our global headquarters here in 2017 and are proud to be a Singaporean company.
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