Banks have left a $240 billion gap, now savvy investors are seeing opportunity
There’s a $240 billion funding gap facing the small and medium enterprises that employ 70% of the population. SMEs play an essential role in the economy. However, changes to regulatory requirements are making it harder for them to access funding to help them innovate and grow.
Whilst this gap presents a challenge for businesses, it also creates opportunity for nimble operators to fill the void as traditional banks leave the SME market to focus on activities like residential mortgage lending.
Aura Group’s Director and Head of Credit Funds Brett Craig is part of an emerging group of private credit investors that have identified the opportunity and are now generating reliable monthly income for investors.
"With the banks taking a step back from lending to small and medium enterprises (SMEs), a lot of Aussie businesses are forgoing growth and profitability because they can’t access debt. So, what we’re seeing is a number of focused SME lenders emerging which operate in different niches – and this market start to burgeon.The reality is you need that debt capital to get the lending businesses going and we're here to provide that to the right lenders," Brett Craig says.
I first met Brett back in 2016 as he was preparing to launch the Aura High Yield SME Fund. The Fund, which is only available to sophisticated investors, recently paid its 70th consecutive monthly distribution. The fund has delivered an income of 9.89% per annum since inception. Brett and Aura Group recently partnered with Roger Montgomery's Montgomery Investment Management to distribute the Aura High Yield SME Fund (for wholesale investors) and to make the asset class available to retail investors via the Aura Core Income Fund.
I spoke with Brett as part of Livewire’s 2023 Income Series to hear his views on the drivers for this income opportunity, how the current economic environment is impacting various sectors of the economy and where he is seeing opportunities to generate stable income.
Topics discussed
- 0:00 - Introduction
- 1:52 - The growth of private credit in Australia
- 3:20 - Why the opportunity in private credit exists
- 4:40 - Economic outlook in Australia
- 5:30 - The impact of higher rates on small and medium enterprises
- 7:47 - Aura’s portfolio characteristics
- 8:45 - How technology is enabling lending to small and medium enterprises
- 9:42 - An overview of Aura’s two income funds
- 10:59 - Competition in the lending market
- 12:06 - Aura and Montgomery Investment Management
Find out more
Learn more about Private Credit and the Aura Private Credit Funds or contact Montgomery Investment Management on (02) 8046 5000 or investor@montinvest.com


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