In the ever-evolving landscape of private markets, private credit has emerged as a crucial asset class. Aura Private Credit’s seven-year journey reflects the increasing importance of this strategy, grounded in prioritising capital preservation and delivering monthly income.
Since its inception, Aura Private Credit has focused on addressing two significant market needs: providing capital to Australian businesses and offering investors an income-producing asset class. In the early stages, Australia’s private credit market was relatively underdeveloped, with most lending dominated by the traditional banking sector. However, Aura identified an opportunity to support Australian businesses seeking funding—an underserved segment that often struggles to access conventional financing.
Aura’s solution is centred on a warehouse financing model that empowers non-bank lenders to extend loans to businesses. This approach not only meets the capital needs of local businesses but also provides investors with access to a growing asset class offering attractive risk-return characteristics and low volatility.
Aura Private Credit’s disciplined focus on capital preservation and diversification has been a cornerstone of its strategy, especially during volatile market periods. The strategy emphasises lending diversification, spreading exposure across over 13,700 loans in different sectors, regions, and loan types. This broad-based diversification effectively reduces concentration risks and supports portfolio stability.
A critical element of the strategy is the short duration of the loans—76% of the loans have maturities of three months or less (as at September 2024). This allows the team to swiftly respond to market shifts and adjust exposures as needed. Such agility has proven valuable, particularly during economic downturns like COVID-19, when the group actively rebalanced its portfolio with the view to protect investors.
As Australia’s business lending landscape evolves, more Australian businesses are turning to non-bank lenders. Aura’s strategy leverages this shift by partnering with established non-bank lenders and focusing on warehouse financing. This approach creates an alignment of interests, as the non-bank lenders’ capital is placed at risk ahead of investor funds. This structure offers an additional layer of protection for investors, ensuring prudent lending practices and mitigating downside risks.
In line with international trends, Australia’s private credit market still represents just a fraction of the broader business lending space, highlighting significant growth potential ahead.
The COVID-19 pandemic posed a significant challenge to many investment strategies. However, Aura Group’s private credit team emerged stronger, demonstrating the resilience of its approach. During the pandemic, the team strategically reduced exposures to at-risk sectors like tourism and hospitality while increasing allocations to more resilient sectors such as agriculture and construction. This dynamic risk management approach enabled the strategy to maintain income stability with no fluctuation in unit price.
Aura also prioritised open communication with lenders and investors, reinforcing transparency and trust during a period of heightened market uncertainty. The team continues to provide regular commentary to stakeholders, ensuring alignment and proactive engagement.
With central banks adjusting monetary policy to address inflationary pressures, the private credit market presents a unique opportunity for investors. Aura Group’s investment philosophy remains centred on protecting capital, managing risk, and generating monthly income returns. The group continues to expand its network of lending partners, with several new relationships currently under due diligence.
Aura’s commitment to team stability and expertise is also integral to its success. By aligning investment staff through employee share options, Aura ensures that its team remains focused on achieving long-term strategic objectives while safeguarding investor interests.
Aura Private Credit’s seven-year journey in private credit exemplifies the potential of an alternative strategy focused on filling critical market gaps while providing robust investment opportunities. With a track record of monthly income returns, capital preservation, and proactive risk management, Aura’s private credit strategy is well-positioned to deliver value to sophisticated investors and financial professionals.
In an increasingly complex investment landscape, Aura’s approach offers a compelling solution for those seeking diversification, income, and exposure to a growing asset class. Looking ahead, the group’s unwavering commitment to consistency and disciplined growth will remain central to its strategy—helping investors navigate uncertainty and capitalise on emerging opportunities in the private credit market.