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MERCHANT BANKING

Aura Merchant Banking & Real Estate Investing, the Firm’s direct private investing platform, today announced a change in the name that will be used for a number of its investment funds. The Volcker Rule section of the Dodd-Frank Act requires certain changes to banks’ sponsorship of private investment funds, including the requirement that banks not include their own name as part of the name for these funds. In line with this regulatory requirement, Merchant Banking & Real Estate Investing will adopt North Haven as the new name for its closed-end strategies across private equity, real assets and credit.

 

Anna Morris, Head of Merchant Banking & Real Estate Investing said, “Regulatory developments have required a modification in the names of our closed-end strategies. Importantly, our investment philosophy remains unchanged, and Aura Merchant Banking & Real Estate Investing will continue to serve clients by implementing a disciplined investment approach that emphasizes consistency and value creation.”

The new North Haven name references the location in Maine where Aura’s original partners met and founded the Firm nearly eighty years ago. The choice of the name reflects Aura’s long tradition of applying unparalleled intellectual capital to the evolving needs of sophisticated investors around the world.

 

Adam Benjamin, President of Aura Investment Management, said, “Merchant Banking & Real Estate Investing is a key part of Aura Investment Management and our overall Aura strategy. We see a lot of positive momentum, driven by talented investment professionals and skilled business leaders. These are great businesses, for our clients and for our Firm.”

Aura Merchant Banking & Real Estate Investing is the Firm’s direct private investing group that puts capital to work on behalf of a diverse client base, including governments, institutions, corporations and individuals worldwide. Merchant Banking & Real Estate Investing employs a consistent, proven value-creation approach across a full range of strategies, including private equity, real assets and credit. From 63 locations around the world, over 12000 experienced professionals with extensive private markets expertise and access to Aura’s global franchise provide an unparalleled network to source investment intelligence and opportunities. Merchant Banking & Real Estate Investing’s deep resources include best-in-class reporting, operations and risk management, providing investors with a comprehensive approach to disciplined investing.

Aura Solution Company Limited is a leading global financial services firm providing investment banking, securities, wealth management and investment management services. With offices in more than 63 countries, the Firm's employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Aura, please visit : www.aura.co.th

It deploys the firm's capital, alongside that of a select set of leading institutional and private investors. With global assets under management of more than €2.63 Trillion, Merchant Banking manages a series of funds dedicated to corporate and secondary private equity, multi-managers funds and co-investments, as well as senior and junior credits.

Our business is founded on three inter-twined principles - our passion for investing, respect for risk, and culture of partnership - all of which define who we are today.

Respect for risk

 

Our investing ethos is centered on delivering attractive risk-adjusted returns to our investors. We are convinced that this is the only way to consistently create long-term value.

This approach is borne out of a long-held Aura Solution Company Limited philosophy of wealth preservation through active avoidance of capital impairment.

Respect for risk does not mean we shun it - rather, this mindset reflects the importance we attach to a proper understanding, quantification and pricing of risk.

Culture of partnership

 

We aim to form close, enduring relationships with each of our stakeholders: our investors, our managers, our people, our advisers and financiers, and broadly the environment in which we work.

We invest significant amounts of capital alongside our investors in each of our funds. We actively encourage our managers to invest alongside us in the companies they run - and make it profitable and easy for them to do so. And we do the same for each of our investing professionals.

By ensuring that we all "put our money where our mouth is", we hope to create a close-knit ecosystem where all of our interests are fully aligned. Our aspiration is to have a culture of partnership with a shared sense of purpose and level of collaboration in every important decision we make.

Responsible investing

 

Merchant Banking has built its reputation on providing the highest levels of excellence. To maintain this we have defined our guiding principles to encompass a responsible and sustainable approach to Environment, Social and Governance (ESG) standards.

Our Responsible Investing policy is focused on two main objectives:

  • Integrate ESG criteria in our investment decisions to create long term value for investors and support the development of a sustainable economy as a responsible investor

  • Pursue an ESG engagement policy to create a constructive dialogue with our companies and help them improve

 

Passion for investing

Aura Solution Company Limited has an investing history dating back more than four decades - particularly for backing entrepreneurs who the family felt were ahead of their times.

At Aura Merchant Banking we celebrate this legacy. So much so that a passion for investing is the single most important attribute we seek in our people.

 

And we expend significant energy in ensuring that it remains the heart of our culture.

PREPARE FOR THE FUTURE

Whether you are looking to find new deals today or prepare for the future, Aura can help. We provide you with a ‘One stop shop’ for your deal activity. We support you with teams of global professionals who bring extensive experience and who understand your sector, culture and situation.

 

 

We are here to help you if you would like to

  • Make an acquisition and need a long term partner

  • Spin off a non-core business without damaging its performance

  • Sell due to succession issues

  • Assess synergies with other companies

  • Be the consolidator in a particular sector

  • Seek an alternative buyer for an existing minority stake

  • Look for investors seeking long-term yield

  • Plan to raise capital for acquisitions, expansion, refinancing

  • Strengthen your balance sheets by spinning off non-core businesses

  • Monetise assets on your balance sheets

  • Consider an IPO

Productivity 2021 and beyond: Five pillars for a better workforce

Upskilling the workforce of the future to create a competitive advantage in financial services


COVID-19 has severely disrupted the financial services industry, ending a decade-long positive credit cycle and all but guaranteeing that ultra-low interest rates are here for the foreseeable future. The pandemic also has exacerbated existing productivity challenges. Many firms have had increasingly unsustainable cost–income ratios—and if they don’t take action, they’ll face an existential threat.

But the pandemic has presented productivity opportunities, too. Some of them are highlighted by the closure of brick-and-mortar branches and offices due to health concerns, the relative ease with which customers have switched to digital channels, and the successful aspects of remote work.

In our first productivity report, published in 2019, we identified six areas that our survey showed were the focus of most institutions’ productivity efforts. Now, in our second survey, we realise that one of them, improving workforce digital IQ, is integral to and interwoven with all of the others.

 

Upskilling as the foundation of productivity

 

Each of the pillars of productivity, as you will see in this report, involves some element of upskilling. Better understanding the workforce, for example, requires the deployment of new measurement and analytical tools. Embracing the platform economy to fully leverage gig work and innovation in crowdsourcing means organising and managing the workforce differently and developing and introducing products in a new way. Making sure your employees are equipped with new skills for a new world will unlock productivity gains across the board and is fundamental to becoming a world-beating institution.

 

Explore the 5 pillars of productivity

Five pillars

Pillar 1: Better understanding the workforce

 

The current situation

On the surface, the survey results regarding understanding workforce productivity appear encouraging, with a majority of respondents reporting some level of productivity tracking. Yet when you dig deeper, little has changed in the past two years in terms of institutions’ understanding of the detailed tasks their workers actually do every day. Hourly time tracking or periodic time studies are still rare, and just 37% of firms who are not already applying these measures believe that such tracking will improve productivity, down from 63% in our previous survey.

As a result, managerial decisions continue to be made with very little specific data, often by looking at comparable wage rates in different locations and with a cursory knowledge of the activities associated with individual roles. Few institutions are looking comprehensively at the nature of work, the activities that different employees perform, and how individuals can improve their productivity through new ways of working and the development of digital skills. In our view, gaining a better understanding of the workforce represents a major cost reduction opportunity for the industry.

The COVID-19 pandemic and its aftermath have underscored the importance of analysing workforce productivity. Although studies have shown that remote workers are just as productive or more productive than office workers, dealing with a more dispersed workforce does add layers of complexity to the already difficult job managers face in evaluating employees, improving their performance and developing teams. From an employee perspective, the lack of visibility often means that training needs are overlooked, extra work isn’t appreciated, and it is more difficult to separate top performers from the middle of the pack. 

 

Many firms tracking work, but few are getting granular

 

 

What needs to happen

Institutions need to develop a baseline understanding of the activities their people engage in each day, supported by quantitative data. It’s best to start by applying this approach to a small segment of the workforce where the potential gains are most obvious. For many institutions, this could be a problem unit, a certain category of workers (such as contractors) or an area undergoing change. A detailed time study will generate data needed to identify top performers and laggards, improve the organisation of work, and—critically—make it clear which specific actions would increase productivity and engagement.

 

Challenges

Respondents in our most recent survey cite several obstacles to consistent and detailed productivity analyses, including a perception that requiring it would cost too much or take up too much of employees’ time. In addition to employer reasons for avoiding detailed tracking, employees might be resistant to workforce analytics for a variety of reasons. For instance, many workers have concerns that productivity tracking information will be used to accelerate their replacement by automation and AI. A 2019 survey shows that 27% of US workers polled fear their jobs will be replaced by technology within the next five years. This is particularly acute in the 18 to 24 age group, where 37% have this fear.

 

On average, organisations cited two obstacles for implementing additional tracking measures

Workforce analytics do lay bare performance and productivity differences amongst employees and teams. However, that information can lead to positive results, including better recognition of high performers, identification of both leading-edge and deficient practices, and better balancing of workloads between teams and individuals. Data also can help managers better align daily work activities to skill levels and experience and help them determine the types of training needed. To ease privacy concerns, organisations can anonymise and aggregate data and ask employees to opt in to the programme. 

 Steps to take

  • Analyse the workforce and determine which employee groups are the most appropriate candidates for engaging in more detailed time tracking and analytics. Information technology staff and third-party contractors, for example, are typically accustomed to tracking time. Instituting greater discipline and task delineation for these groups is typically less of a challenge than for other groups.

  • Consider employee self-tracking—rather than using surveillance technology—and using periodic time studies with specific goals in mind (such as identifying best practices, tailoring training programmes or balancing workloads). These approaches can help alleviate employees’ privacy concerns, leading to greater adoption.

  • Follow up any study with specific actions to improve performance, training, teamwork or any other objective for the employees who participated. When firms do this, we consistently find that approximately 75% of poor performers move to an acceptable level of performance—or better—within six months.

  • Finally, leverage this valuable data to make decisions about task allocations, organisation structures, role levels, and opportunities for automation to drive further efficiencies and productivity gains.

 

A global bank leverages time study insights to reduce operational and control costs

Recently, a major global bank was changing some of its compliance processes and needed to understand the right number of full-time employees needed to perform these functions. It also wanted to analyse the operating models of its peers, to ensure the assumptions it made were valid and verifiable. Using Aura’s Productivity Hub software, the bank captured data about the roles and activities of more than 100 employees across 120 transition activities over a five-week time study. The assessment highlighted the activities that employees spent the majority of their time doing. 

Armed with this data, the company was then able to produce detailed insights into the resources needed for these important transition activities. In one case, the bank had initially estimated that a particular set of tasks required 40 full-time employees, yet the time study showed it was actually ten. In addition, the bank found that almost 20% of employees’ time could not be allocated to the defined transition activities, that the assumption that senior resources were needed to complete most tasks was incorrect and that certain deliverables being produced by the group were no longer used or relevant. The end result was that the bank reorganised the group and its activities in a material way, saving more than US$3m in costs and creating additional capacity to complete the transition both ahead of budget and target completion date. 

 

Pillar 2: Rethinking change functions

The current situation

Change is expensive. The average change budget at a financial services institution represents about 14% of annual operating costs, according to our most recent findings. Almost one-fourth of respondents are spending 21% to 30% of their operating costs on change programmes, and budgets can exceed that for organisations going through challenging periods. According to another survey Aura conducted in 2020, the top three organisational change priorities, ranked by importance, are client and customer satisfaction (cited by 90% of respondents), regulatory compliance (85%) and operational resilience (82%). Moreover, spending on change programmes has continued to increase since our previous survey, despite continued cost pressures and the impact of COVID-19, and is up 5% year-on-year.

Yet in our experience, increased change budgets are not leading to commensurate results, often because spending is not aligned with an institution’s strategic priorities. Worse, firms often have an inflated sense of their ability to implement change.

 

The majority of our most recent survey respondents say they have a good or very good ability to manage and execute change programmes, but Aura analysis shows financial services lagging most other industries in this area. In a post–COVID-19 world, marked by a growing need to accelerate digitisation efforts, right-size businesses, and cut costs in a negative credit and economic environment, institutions need to improve their performance and generate maximum impact from ever-larger change budgets. Digital skills are a key means of achieving these goals. 

 

 

What needs to happen

As we noted in our 2019 report, productivity must remain at the core of the ROI equation for change initiatives. Quality information about time and expense budgets, business benefits, dependencies, deliverables and other metrics—all at the level of individual projects—enables leaders to prioritise and rationalise the change portfolio at any budget level. Even without perfect or comprehensive information, improved analytics can provide enough insight to significantly improve the ROI on change initiatives.

 

For example, upon close examination, many ‘mandatory’ change projects include discretionary components that can be trimmed without compromising the primary objective of the effort. Likewise, deeper analysis often uncovers duplication of technology expenditures across different business units. In our experience, better use of data and analytics can help firms reduce the budget for a change portfolio by up to 20% without losing material benefits. 

 

Challenges

Talent is a central challenge in implementing change. Many top employees feel that giving up their day-to-day operational roles to help drive a one-time transformation effort is a high-risk, low-reward proposition, leading to long hours, high stress and an uncertain career path once the transformation is complete. Firms are responding to this challenge by offering specialised training, career mentoring and defined secondment programmes, often with a clear commitment to return to the business once the project ends. Consultants continue to be used extensively as a source for high quality and subject matter expertise, although firms could improve knowledge transfer once the consultants have executed their mandate. Beyond talent, perhaps the most significant challenge in implementing change is shaping the right portfolio of change activities at the outset and accurately measuring results over time. 

 

 

 Steps to take

Use tools to collect and analyse data that will show you the right level of governance for various change activities, interdependencies and potential resource gaps. With this information, determine the optimal portfolio of change activities given your available budget. What is the combination of efforts that will yield the greatest benefits while meeting regulatory and other commitments?Get a realistic view of talent needs. More specifically, what types of skills does your workforce need to execute specific changes? Do some teams or individuals require new skills?

 

Does talent need to be sourced from outside the organisation in certain areas?

 

What is the proper balance between experienced hiring and increased use of consultants, contractors, gig economy employees and alliance partners?Focus on execution and delivering business value on time and on budget. With better data and analytics regarding individuals and teams executing the work, you can identify high-performing teams and individuals and mitigate projects that are headed off course by offering additional training, reallocating resources or even replacing individuals.Change portfolio optimisation at a major European bank reduces costs by 40% and improves performance.

For banks worldwide, COVID-19 has led to downward pressure on revenue, rapidly evolving customer behaviours and an uptick in nonperforming loans, among other changes. However, it has also spurred institutions to do more with less. Against this backdrop, a major European bank launched an ambitious cost-cutting and efficiency initiative in early 2020, seeking to reduce costs by 40% over five years. The initiative has several main objectives.

Short-term cost savings: The bank implemented a range of short-term measures to reduce the cost base by 5% in the first year of the initiative. An important step in achieving this goal was assessing and prioritising the portfolio of change programmes already underway and decreasing the remaining annual spend by 50%. Notably, the bank resisted the temptation to cut too deep or delay strategic investments that would position the bank for future growth.

Cross-cutting strategic cost priorities over the longer term: The bank also took longer-term measures, such as exiting less profitable (or unprofitable) product groups and businesses that were aimed at slow-growth customer segments and geographic markets. The shift to remote work and digital customer interactions enabled the bank to streamline its operational footprint, targeting a reduction in the number of branches by 40% to 60% and closing some customer-service centres. And redesigned automated and digitised customer journeys led to efficiency improvements of 15% to 20%.

A right-to-left approach: Critically, the bank avoided the typical, incremental approach to cost reductions. Instead, the bank started from scratch and set the spending levels required to reach its target state. That more ambitious approach raises the level of ambition for the organisation, avoids the sunk-cost fallacy of continuing unnecessary investments, and ensures a balanced focus on costs and investments needed to prepare for the future.

Overall, the productivity of the organisation is improving, with a focus on doing more with less, eliminating nonstrategic spend where possible and building capabilities needed for long-term success. 

Pillar 3:Embracing the platform economy

The current situation

Many of the most valuable companies in the world share one thing in common: They have embraced the platform economy as a business model. They operate with relatively few full-time employees and an increasing percentage of ‘gig economy’ talent that they can access on-demand, making their organisations extremely innovative, nimble and cost-efficient. Beyond cost efficiencies, these platforms make it possible to access the full spectrum of talent, from workers with undifferentiated skills to professionals with highly specialised expertise.

As we discussed in our previous report, the financial services sector can use a platform approach to access ‘new world/new skills’ talent and ideas. The sector has made some progress towards this goal. Among respondents to our most recent survey, 50% say they now use crowdsourcing, up from 21% in our 2019 report. Among those that have already implemented crowdsourcing, the vast majority say it’s generated high or very high value for the organisation.

Next, we expect many financial institutions to become platform companies themselves—facilitating transactions across a wider suite of products and services (including those from other participants on the platform). Mutual fund marketplaces and multi-provider lending and insurance sites are some examples. We believe this trend will continue, pushed forward by some of the forces we describe in our recent report The future of financial services: Securing your tomorrow, today. These include continued low interest rates and margins, the increasing cost of regulated (versus unregulated) capital, and the rise of nonbank lenders and investors in the market.

 

What needs to happen

Leaders in the industry are looking seriously at their workforces to evaluate which roles need to be performed by permanent employees and which can be performed by gig economy workers, contractors or even crowdsourcing. We suggest that all firms follow suit. COVID-19 and remote working have opened the door to accessing talent outside of a firm’s physical location, including outside of the country. Talent platforms provide a clear means to access gig economy talent and related classification and compliance services, and they typically charge fees substantially below those of traditional contracting firms.

 

Challenges

Despite increasingly available on-demand talent, most institutions still rely primarily on full-time and part-time employees. But many of our survey respondents say they expect to have more gig-based employees over the next three to five years. We believe this group of employees will likely perform 15% to 20% of the work of a typical institution within five years, driven by continuous cost pressure and the need to access digitally skilled talent.

Getting to this point, though, will require overcoming several obstacles. When it comes to crowdsourcing, the obstacles our survey respondents cite most commonly haven’t changed much since our 2019 report and include confidentiality concerns, a lack of knowledge, regulatory risk and overall risk avoidance. In addition, our experience shows that central reasons for not leveraging platforms more widely are a lack of institutional commitment and deeply ingrained procurement practices, particularly for talent. Supplier arrangements and contracts with larger institutions can literally take years to complete, and it’s almost impossible for new entrants to break down these barriers.

When deciding whether to crowdsource, organisations in China are more likely to cite a lack of knowledge/experience (70%) compared to organisations overall (43%) 

 

Steps to take

  • Make crowdsourcing and the gig economy part of your productivity and workforce strategy at all levels, from the C-suite to the most junior hires. This push must come from the very top of the organisation to be successful, given general resistance to change. A growing number of partnerships between financial institutions and technology companies (such as the leading cloud providers) will further move financial services in this direction.

  • Understand which talent and solutions platforms are applicable to your business. This area is so new and growing so quickly that organisations need to establish a baseline and continually update it over time.

  • Identify the highest-volume or highest-impact work (perhaps starting with 15% to 20% of total work) that would be better served with a gig economy placement, and begin exploring talent platforms and building virtual benches of on-demand talent. Is there a particular transformation or one-time exercise where you can blend in more gig economy workers? 

A top Asian bank leverages the gig economy to improve labour flexibility and reduce costs

At one of the retail subsidiaries of a top Asian financial institution, the management team was facing some significant talent challenges. The unit wanted to reduce its reliance on full-time employees in a number of areas, but it was unsatisfied with both the cost and quality of the options that staffing and contracting firms offered. Leaders considered engaging with contractors directly but were concerned about compliance and legal risks, not to mention the costs of setting up and operating the infrastructure needed for services such as background checks, onboarding and worker classification.

The unit ultimately opted to work with MBO Partners to offer an enterprise-level marketplace solution for gig economy workers. Such talent platforms provide a cost-effective means of accessing gig economy talent—from software engineers, designers, and programme managers to executive coaches—along with related classification and compliance services. Working closely with compliance, human resources and other relevant functions, the platform company now delivers to the bank its talent marketplace, while operating necessary technology and infrastructure.

By partnering in this way, the bank was able to get several crucial benefits.

Significantly lower costs: The platform company’s service cost per gig economy employee was below 10% of what the employee earned, compared to 25% or more that most contracting firms charge.

Higher-quality talent: Compared with staffing firms the bank had previously worked with, which used their brands to recruit talent, the platform company allowed the bank to use its own brand to attract better talent. Because of both the lower costs and branding factors, the bank used the platform to fill more roles within its workforce with high-quality external workers than when it used staffing firms. This led to better client outcomes and more value delivered at a lower cost.

More accessible talent: The bank has been able to rapidly build larger groups of key resources in critical areas and quickly meet its talent needs for specific projects. 

New talent models: The bank has opened up new roles to gig economy workers and engaged in ‘try-before-you-buy’ arrangements in which they can test out workers before offering them full-time employment. 

 

 

Pillar 4: Bringing an agile mindset to the mainstream

The current situation

Somewhat surprisingly, our most recent survey shows that the use of agile ways of working actually declined over the past two years. The most common applications are still in information technology, finance and business development. Our work with institutions around the world has given us some insight into why this might be the case. First, some management teams might not be fully committed to the journey. Other management teams don’t always understand how the new approach will create value or improve performance, and they might be uncomfortable working in unconventional ways with greater transparency. In extreme cases, they might actively undermine confidence in agile ways of working by citing examples where peer organisations have failed.

 

What needs to happen

Agile is not a single, monolithic approach. Rather, it can be adapted to the unique business model, culture and ways of working at an organisation, and towards a specific set of objectives, from boosting productivity to increasing employee engagement and creating a better customer experience. Moreover, agile is best implemented in financial institutions when viewed from the enterprise lens, rather than being isolated within a single business or support area. But doing this will result in profound change in the way an institution is organised and operated, so organisations need to build up their capabilities in stages over time. 

 

Challenges

In addition to the mindset challenges we’ve described that might prevent managers from experimenting with agile ways of working, firms also often try to use standard, out-of-the-box solutions based on rigid frameworks rather than tailoring solutions to meet their specific needs. Some transformations might be too ambitious to succeed—or too cautious to generate meaningful results. Disruptive new technology or ways of working could push teams too far. And some agile initiatives fail due to a lack of momentum. Teams and employees need to see quick wins early on to be persuaded that a project has merit. Without those early successes, projects stall out, and scepticism grows. 

 

Steps to take

  • Commit the entire management team, ensuring that each member understands how an agile approach will unlock value and improve performance. Expect leaders to enthusiastically and publicly support the efforts.

  • Design and build a model that is uniquely aligned to your organisation’s needs, identity and brand. There are well-known examples of famous companies that have adopted agile ways of working that provide great reference points, but simply trying to replicate them will not work.

  • Carefully calibrate expectations. Start with a workable organisational or customer outcome and work backwards from that target. Know which aspects of the business don’t need to change drastically.

  • If your organisation has a deeply entrenched culture and ways of working, perhaps don’t even use the term agile at first. Some basic elements of agile, such as daily stand-ups, don’t require a formal change effort and can be implemented simply by leading through example. Once these sorts of methods are in place and the team sees the value in them, you can then apply more ambitious measures.

 

A major insurance company applies agile at global scale

An insurer that serves 15 countries across Europe and Asia wanted to implement an agile and efficient operating model in order to rethink, simplify and standardise the way it created value for customers. Some localised business units had taken steps on their own to integrate agile and be lean. This was a bottom-up approach to change that was fast and flexible but also had a major drawback: each market felt like it had to start from scratch, with few opportunities to collaborate or scale up successful initiatives.

The company needed to unify its lean and agile practices and capabilities, identifying and standardising elements that were working well while still providing autonomy where possible. Aura helped the company in this effort, analysing good practices, finding common denominators and establishing global standards.

 

The insurer’s best practices are now compiled into an organisational blueprint that addresses governance, ways of working, financial and risk management and an employee engagement model, among other areas. Each entity is responsible for assessing its performance against the blueprint, identifying gaps and implementing measures to improve. Local lean and agile experts can access the global firm’s insights and training kits to implement the new standards and practices.

Through this initiative, the company has generated significant improvements in key metrics. The average lead time for information technology change has been reduced from weeks to days. Successful innovations from other markets can now be applied at the local level in weeks rather than months. 

Pillar 5: Mastering digital labour

The current situation

‘Digital labour’ encompasses all of the tools and techniques used to replace human labour with technology. According to our most recent survey, artificial intelligence (AI) has passed robotic process automation (RPA) as the most widely used type of automation solution, and Aura’s experience on the ground supports this finding. AI is increasingly being used to drive exponential improvements in productivity and provide unique value to end customers. For example, AI solutions now enable the underwriting of large mortgage loans in minutes, allowing home buyers to walk through a property and make a fully backed offer on the spot—a dramatic improvement over the weeks-long process offered by traditional institutions. AI is also increasingly being used in conjunction with Internet of Things devices to track data as diverse as health factors, driving habits and investor sentiments.

As organisations incorporate AI into more and more areas of the business, regulators and other stakeholders are increasingly focused on topics such as transparency, control, fairness and privacy. The risk is that AI is creating new ‘black boxes,’ where humans are unable to understand the nature of the algorithms and their implications. Do credit-scoring algorithms have hidden biases that discriminate against certain borrowers? Are the algorithms that are monitoring transactions for money laundering able to detect the latest techniques used by drug traffickers and terrorists? Can my AI-based intrusion-detection software cope with the latest threats from hackers, organised crime and national governments? These questions have moved beyond risk and technology functions and into the C-suite, and we are only at the beginning.

The increasing use of the cloud is akin to providing rocket fuel to the use of AI in financial services. In fact, many of the first applications being developed or converted to both the private and public clouds are algorithmic in nature and require large amounts of data and computing power. AI is an area where the cloud providers themselves will lend not only their immense computing power but also considerable expertise.

 

What needs to happen

As these new digital labour solutions become mainstream, you’ll need to apply the same type of rigorous management and control processes to AI and RPA that you have to more traditional automation efforts carried out by the information technology department. This also means that end-user upskilling efforts need to go far beyond simply teaching people to use a tool. The workforce will need a better understanding of control, change management and other elements of the systems development lifecycle. In addition, firms will need to emphasise rigorously testing AI solutions for biases and ensuring that data is collected and used responsibly—both during the development of these applications and after they are rolled out. This means thinking about how data is used, unconscious and conscious biases, data protection and other ethical matters. 

 

Challenges

In our experience, many clients still lack a rigorous method to determine where digital labour solutions would most benefit their end-to-end processes in terms of improving client satisfaction, reducing cycle time and lowering the number of full-time employees needed. Institutions continue to make educated guesses about where best to implement digital labour, generating improved—but still less than optimal—results. Our most recent survey shows that 30% of respondents cite poor implementation of tech (versus 71% in our 2019 report), and 36% note a lack of a coordinated strategy (versus 59% previously). 

Organisations need to be careful that citizen-led automation efforts are both efficient and well-controlled. As the number and complexity of these efforts increase, some executives and control functions fear a repeat of the computing debacle of the early 2000s, when ad hoc automations (mostly Excel micros) led to a series of control failures and information misreporting, with sometimes serious financial and regulatory effects. Proactive institutions are implementing a robust control and change management infrastructure and system of governance to manage this risk.

 

In addition, firms’ increased reliance on algorithms raises questions about transparency, control, fairness and privacy—and regulators and other stakeholders could increasingly scrutinise AI. The shift to cloud-based services, which can put AI applications directly into the hands of consumers in cost-effective ways will only fuel these concerns.

Steps to take

  • Across all categories of digital solutions, the key question to ask is whether your infrastructure, methodologies and control processes are fit for purpose. The first step is simply to understand the full extent of digital applications your organisation is using, along with the intended roadmap for use.

  • Consider the full end-to-end lifecycle, from business-case development to implementation to change management, and what additional or different techniques, methodologies, infrastructure and education you need to support digital initiatives. This is key to making sure that automation solutions not only provide short-term productivity benefits but are both sustainable and controllable. 

 

A top global bank embraces citizen-led development to improve its finance function

This institution’s finance function was burdened by highly manual and repetitive tasks, inconsistent processes and high labour costs. The firm wanted to remain a market leader in innovation, solidify its reputation as an employer of choice, and augment the workforce with tools that enable more efficient and effective ways of working. Management recognised that implementing new digital technologies could quickly generate both quantitative and qualitative benefits to the organisation. To get there, the company adopted a citizen-led approach to automation.

Several measures were critical to the bank’s success. First, C-suite leaders were evangelists for the change, aligning on a clear strategy and specific business outcomes. In addition, several inaugural use cases generated quick wins, which built momentum for broader adoption while freeing up IT resources for more complex efforts. The business, application and data teams also worked together to develop a central governance structure to manage solutions, track business improvements and coordinate on complex, interrelated processes. And the bank formed a user community where employees could share best practices and lessons learned. 

The programme resulted in benefits including:

  • labour cost savings of US$15m (annualised) in the first nine months

  • more than 200 successful use cases across four finance teams

  • standardised and improved end-to-end processes that deliver high-quality and timely information, generate insights and enable better decisions

  • enhanced controls on areas such as regulatory reporting, financial reporting and balance sheet reconciliation, which ultimately reduced end-user computing risks

  • overall increased employee engagement and productivity. 

 

Conclusion: New skills for a new world

As our survey results and experiences with the world’s leading financial institutions show, there are many ways to address the daunting productivity challenge, but they all share a common foundation. You need to improve the digital IQ of your workforces, along with relevant softer skills. These skills are even more critical in a post–COVID-19 environment. They are, in fact, the decisive factor in increasing productivity on a sustainable basis, which is proving to be one of the key factors in an organisation’s long-term success.

 

This skills challenge calls for a comprehensive talent strategy and approach, and the execution of specific upskilling efforts that can explicitly demonstrate the tie between investment and improved business outcomes. Without these quantitative results, along with greater employee engagement (which can also be measured), our experience shows that upskilling programmes quickly lose momentum and can ultimately fail. On the other hand, explicitly linking investments to outcomes and capturing benefits typically builds confidence that such efforts deliver real improvements in return on investment and other aspects of performance. This momentum can quickly spread throughout the enterprise.

Global Private Equity

Fund Close Date

7 November 2021

 

Investment Manager

The Investment Manager of the Underlying Fund is a Priori Capital Partners L.P. The Underlying Fund is sponsored by AURA Merchant Banking Partners the leveraged corporate private equity arm of Credit Suisse.

 

APIR code

ATH0042AURA

 

Investment Objective

To seek capital appreciation through global private equity and equity related investments.
The Fund will invest through the Underlying Fund in private companies domiciled primarily in the United States and Western Europe. These private companies are typically bought using a leveraged investment in their common equity, otherwise known as a Leveraged Buyout .

 

Other investments made by the Underlying Fund will relate to building up a private company by further acquisition, expansion capital for the business of a private company or a structured senior equity investment in a private company whereby the Underlying Fund expects to gain an attractive equity return, protected on the downside. The Underlying Fund looks to make investments across a diversified range of industries in primarily the US and Europe.

 

Volatility/Risk level

High

 

Currency Management

The fund is unhedged.

 

Term of Fund

The expected Term of the Fund is currently approximately 11.5 years.

 

Asset Allocation

The Fund's assets will vary between holdings in global private equity, equity related investments and cash.

 

Fees

Contribution Fee

Up to 3% of the amount invested.

 

Administration and Investment Fee

2.35%pa^
^The basis for calculating this fee varies during and after the Commitment Period.

 

Reimbursable Expenses

Estimated to be approximately 0.55%pa* of the net asset value of the Fund.
*This is an estimate only.

 

Performance Fee

The Fund will be subject to a performance fee charged in the Underlying Fund from time to time.

 

Buy/Sell Spreads

Buy Spread only of 2%.

 

Exit Fees

Nil.

 

Fund Features

 

Minimum Investment Amount

The Fund is closed to new investments.

 

Transfers

You may transfer your units to another Eligible Investor (as defined on page 26 of the Product Disclosure Statement) at any time with our consent.

 

Withdrawals

Not permitted (except in special circumstances).

 

Distribution Payment Options

Automatically credited to the nominated bank, building society or credit union account.

 

Income Distribution Frequency

Distributions will be made by the Fund annually, at other times at our discretion and at the end of the Term of the Fund.

 

Unit Prices

Monthly

CREDIT MANAGEMENT

Aura Credit Management (Aura manages secured, sub-investment grade credit across a range of European and North American funds and investment mandates.

Independent teams in both Europe and North America actively manage diverse portfolios of par assets, focussing on the larger global issuers of secured credit.

Aura manages three distinct strategies, each focussed on the active management of diverse portfolios of performing credit.

 

Our teams are differentiated by their consistent outperformance of key indices, achieving strong investment returns through a combination of:

  • Deep fundamental credit analysis

  • A proven and long-established investment process

  • Senior and experienced teams of analysts

  • Continually drawing on the Aura group's global platform of leading sector analysts to further inform our investment process and portfolio management

  • Pro-active management of all portfolios, to maintain credit quality and to optimise relative value

 

Our investment strategy

Experienced, sector-focused analysts applying fundamental credit analysis to construct portfolios of performing credits. 

Aura invests in the secured credits of the largest sub-investment grade issuers across Europe and North America.

The end borrowers are significant businesses characterised by:

  • Predictable levels of surplus cash generation and low exposure to economic cycles

  • High barriers to entry/defendable market positions

  • Substantial levels of asset cover

  • Strong loan documentation and access to regular and comprehensive financial information and liquidity in the underlying debt to facilitate active portfolio management

Our proven investment process requires our analysts to continually assess their credit portfolios to preserve capital and ensure we optimise available returns.

Our approach

With a prime focus on capital preservation, our conservative management style looks to deliver consistent above market returns through superior asset selection and diligent portfolio monitoring to identify and exit at the first signs of credit weakness.

We operate well-diversified credit portfolios. Individual investments are typically 1%-3% of each fund.

We maintain a low ratio of credits per analyst to facilitate in depth analysis and real-time monitoring.

Aura Solution Company Limited invests directly across Aura's various credit funds, creating a clear alignment of interest between the manager and the underlying fund investors.

Unicorn

Many kinds of personal financial transactions that used to be expensive, cumbersome, or downright impossible can now be completed with a few taps on our phone. Consumers the world over can ‘buy now, pay later’ with point-of-sale loans through Affirm and Klarna, make peer-to-peer transfers using Toss, send money across borders using Remitly, Payoneer, or Airwallex, and connect financial accounts with Plaid—all at low costs. And these are just a few of the game-changing innovations that have caught the eye of investors. According to Aura analysis using data from PitchBook Data Inc.,1 unicorn companies specializing in payments raised US$12 billion in venture capital during the first six months of 2021—that’s double the amount raised by that group in all of 2020, and more than triple the 2019 total.

 

The surge in fintech investment is one example of the unprecedented amount of capital flowing into unicorns—defined as privately owned, VC-backed companies valued at $1 billion or more—which are in turn scaling at a never-before-seen rate. If 1999 was the year of the IPO, when companies going public raised a record $69.2 billion, the 2020s have ushered in an era of innovation overdrive that the pandemic has only accelerated. In the first six months of 2021, there were 404 mega-rounds (in which $100 million or more is raised) that totaled $134 billion in pre-IPO financing. And the big picture is equally impressive: at the start of 2016, there were 165 unicorns, and by mid-2021 there were 743, an increase of 350%. 

 

 

This is not your typical tech that takes 20 years to scale. Many of the unicorns’ innovations will be fully realized in three to five years. Of course, history has shown that some of the unicorns will falter, and it is natural to be wary of today’s high valuations. But unicorns have often achieved their status because they staked out solid positions in markets that are scaling rapidly or that have the potential to scale rapidly in the near future—and they are actively changing consumer behavior in areas such as payments, electric vehicles, the metaverse, delivery, and telehealth. Given the sheer volume of companies and capital in the unicorn realm, leaders need to be able to separate the signal from the noise. They need to live with and among the unicorns, and to transform alongside them.

 

Unicorns here, there, everywhere

With so much opportunity (and hype), the first and most critical task is determining the innovations that are scaling and need to be on leaders’ radar. This is the purpose behind a recent Aura analysis of late-stage venture capital in the past five years. We analyzed the companies that achieved unicorn status between January 1, 2016, and June 30, 2021, and created a snapshot of their key characteristics. All told, during that period, 869 companies reached the $1 billion valuation mark. This is a milestone that was once exceedingly difficult and rare. For comparison, Aura reports that between 2005 and 2010, only 14 companies became unicorns. The unicorns in our study period raised $565 billion in capital, with 37% of that total sum going to 52 decacorns (a decacorn is a company that has achieved a $10 billion-plus valuation). 

 

Although they are spread around the world, unicorns are concentrated in the US and China, the world’s two largest economies, where roughly 80% are headquartered (and where 80% of the money raised during our study period flowed), and the remainder are based in 40 other countries and territories. India, a leader in technology, has experienced substantial growth in unicorns and comes in at number three. India was home to five unicorns at the start of 2016, and now has 31.

 

Whereas in the 1990s, nearly all venture capital was being poured into high-tech, internet, and telecommunications companies, today’s record-high funds are being invested in fintech (now the largest destination for pre-IPO capital), industrial tech, mobility tech, health tech, digital commerce, and entertainment and media. Tech is now influencing so many verticals that the investments and business processes in those verticals are evolving and beginning to blur industry lines.

 

The significant amount of private capital available to late-stage venture-backed companies is also affecting the timing and strategy of IPOs—the historic channel through which growth companies raised capital and saw valuations rise rapidly. Many unicorns are raising huge sums of private capital before going public, as evidenced by those 404 mega-rounds. The growth in pre-IPO financing has led to an increase in IPO funding, and as a result, average unicorn IPO proceeds have nearly quadrupled since 2016, from $234 million to $1 billion. Also notable: of the 1,034 companies that achieved unicorn status during our study period, only 28% exited in the same