Speaker 1: 0:05

Welcome to the Finance Friends podcast. Whether you have followed us from the beginning or you're a new listener, we are excited to have you here. Finance Friends gives our listeners a seat at the table with successful finance industry leaders. Follow us on our socials at Finance Friends Podcast, linked in the description box of this episode, and stay tuned for weekly episode releases. Today's episode we spoke to Andrew Beaumont, who's a fund manager at Vest Capital, a private credit manager based out of Sydney. Really interesting story Talks about. He studied commerce at university a university and then worked for a large big four accounting firm in audit, transitioning to management consulting, where he spoke about the importance of having a strong team and being around smart people to where he is today and the unique skills required to be successful as a private credit manager. Listen in, andrew. Welcome to the studio. Thanks, fabian. Nice to meet you. Nice to meet you too. So you currently are director at Vest. Is that right? That's exactly right. Tell me what you do and who are Vest.

Speaker 2: 1:16

Yeah, sure, so-.

Speaker 1: 1:19

Vest Capital. Sorry, Vest Capital, yeah, that's right.

Speaker 2: 1:21

So Vest Capital is a private credit fund manager based in Sydney. We have an office in Brisbane as well and, yeah, we focus on raising capital from investors to invest in private credit or private debt across Australia. So what that means is we will raise capital into our funds across Australia. So what that means is we will raise capital into our funds and then we will go and write direct loans to businesses throughout Australia, backed by real estate, backed by property.

Speaker 1: 1:52

Yeah, okay. So for anyone that doesn't understand what private and public credit are, can you just maybe give us a bit of an understanding of that?

Speaker 2: 2:00

Yeah, sure. So typically or traditionally, if you want to go and get a loan or borrow money to buy a property or take out a loan for your business secured by your property, you would go to a bank and you would go to talk to one of the big banks or a small bank and you would talk about what your business is doing and your cash flows and your ability to borrow that money. Now, those are big public institutions, typically backed by deposit funds or other wholesale capital instruments in the market bonds that the banks may issue, things like that. So those are really big public institutions. Private credit is, and private capital more broadly is, where you may have fund managers who are going out and raising money from private investors and they're going in and writing those loans or otherwise allocating into private markets directly as funds.

Speaker 1: 2:58

Yeah, okay. So that's the difference, because a bank is obviously a deposit-taking institution, so the source of funding most of the time from a bank is obviously a deposit-taking institution. So the source of funding most of the time from a bank is people that put deposits in the bank, their cash at bank, their term deposits. The bank then uses that to on-lend to people that want to buy houses or do developments. But now the banks have pulled away from that development finance or real estate-backed developments and there's an opportunity for Vest Capital and other businesses to provide development finance or real estate-backed developments and there's an opportunity for Vest Capital and other businesses to provide this source of funding to the developers. Is that right, yeah?

Speaker 2: 3:34

definitely. I mean, look, the banks have pulled back from development finance. But we don't only focus on that market. We provide business loans more broadly secured by Australian real estate. So you know the banks are doing a fantastic job in their large, systemically important institutions.

Speaker 2: 3:54

I think where private credit has filled a gap that perhaps was always there is that ability to step in and provide a loan to a business that is fast and flexible. You know, that ability to move quickly, that ability to be the fact that we're small, the fact that we're not a giant organisation with enormous market capitalisations and thousands of employees, means we can make decisions quickly, and so that ability to be fast, to be flexible and actually help businesses that need to borrow capital in that way, I think that's just a gap that was always there, and so you know there's development. Finance is one component of that, but there's just more business loans more broadly secured by real estate. That you know. There's a real demand out there from businesses who are looking to solve, you know, funding problems.

Speaker 1: 4:46

So, in terms of Vest Capital, is it always the secured against real estate, or do you look at a business balance sheet as well?

Speaker 2: 4:54

Yeah, all our loans are secured by Australian real estate and that can be a mix of residential, commercial, industrial real estate, Always secured by Australian real estate. But we obviously do look at the broader context of the business. We do look at their financials, their cash flows, their assets and liabilities and things like that, Absolutely Just to understand the business and make sure the lines we're writing we've done our due diligence.

Speaker 1: 5:19

So, in your role as the fund manager, yes, so are you responsible for sourcing the deals, as they call it in the industry origination, or are you focused on raising the capital? Or do you have a responsibility across both sides of the equation?

Speaker 2: 5:37

Yeah, so we've got a team and our team fills all those gaps. You know it's interesting. It's interesting you talk to fund managers who might be equity fund managers or bond fund managers that origination side of the business is not as much of a factor. Yes, they need to go out and analyse markets and really source those great investment opportunities. But the difference with private credit is you actually need to go out and structure the loan as well as raise the capital investment opportunities. But the difference with private credit is you actually need to go out and structure the loan as well as raise the capital, and so you've got that origination side as well as that distribution side. So you know, we have in our team directors that are purely focused on origination. We have directors that are purely focused on raising capital, and then we have, you know, lots of directors, other directors, lots of team members involved in operations and finance operations and treasury and credit and a whole bunch of things, et cetera.

Speaker 2: 6:32

exactly. So myself I sit across, yeah, the funds management and raising capital and originating somewhat as well.

Speaker 1: 6:41

And what is the average turnaround time from, say you seeing an opportunity to provide finance to a company to actually raising that capital and giving that company the finance they require?

Speaker 2: 6:58

Yeah, it can be very short, you know, particularly if we have some available funds that we're looking to deploy, we can from inquiry through to settlement and the provision of those funds can be as fast as a week or two, very, very fast. And really that's the gap we're trying to solve in the market is somebody comes to us, they need some capital. That's solving a short-term problem. That might be a bit more complex and we can step in and solve those problems quickly.

Speaker 1: 7:29

And how would that compare to a big four bank?

Speaker 2: 7:33

Well, I mean, obviously it takes much, much longer with the banks and the large non-banks, but you know the cost of capital is much cheaper. So you know we're not trying to be a long-term solution for borrowers, we're trying to step in and be that short-term solution. You know an example we see all the time. You know somebody is buying a property. You know they're running a successful business. They might have an investment property. They put a deposit down, you know, and settlement is fast approaching. While they may have already had pre-approval, the credit has not actually been signed off and often business borrowers may have slightly more complexity to their transactions than, say, a typical small family, mom and dad borrower Exactly.

Speaker 2: 8:24

And so they might come to us and say it's a week or two weeks before settlement, we haven't got the final approval from the bank. We want to eliminate the risk on this. Can you please help us settle the purchase of this property? Otherwise we're going to lose $100,000 on our deposit and then we can help them settle it and then after a few months they can go back into bank and generally get a better rate, get a better rate exactly.

Speaker 2: 8:44

So we're really about that short-term and that sort of slightly more complex solutions and we're in there to help people in a short-term nature and then get them back into the banking system or get them back into the non-banking system.

Speaker 1: 8:56

And what are the key skills to understanding whether it is a good deal for you? And for your investors.

Speaker 2: 9:06

Yeah, sure, I mean, we're blessed with a fantastic team at Vest Capital and you know we've got some of the best people I've ever worked with, who understand risk, understand property and understand business. You know how to analyze businesses amazingly. So that's a question that our head of credit would be able to answer better than me. But you know I'll do my best. You know we're looking at a range of factors. We're obviously going deep on the asset. We get independent valuation reports done on the properties. We only use value as we trust.

Speaker 2: 9:41

We really want to understand the business. Why do they need the money? How are they going to repay this loan? What are the other things going on in that business that actually may impede that or impair that? What are their cash flows like? What are their assets in line? So we'll really go in and look at the business. We'll look very deeply at the property and we're able to accomplish this work very, very quickly. So we've got, as I said, we've got a fantastic team.

Speaker 2: 10:06

We work through these things really, really quickly and it's that holistic picture of the overall risk profile of a particular deal. We're considering a whole range of factors. That's the microcosm of the deal. All of this is being done against a backdrop of what's our overall portfolio, what's our concentration of the current deals we have, current loans we have in particular states or industries, or against particular asset classes or property types. You know what's the macroeconomic picture at the moment, or what's the economic picture for a particular sublocation like that particular regional city or capital city or state. How are they performing economically at the moment and what's the outlook. So all of these things will come into play in terms of how we make a decision on funding or allocating capital to a particular loan.

Speaker 1: 10:56

And if you are, is it a wholesale offering? Only it is for investors, yes. So what is the average return an investor can expect to receive over a 12-month term?

Speaker 2: 11:09

Look. Each loan is different. Some loans are lower risk and attract a lower return. Some loans attract a higher return, but we're comfortably providing at least double-digit returns for our investors. So above 9% in the 10% regularly and there's been a fantastic performance there.

Speaker 1: 11:32

Which is quite attractive if you can get something, that is, you know, you've got a real estate backed investment and it's a debt instrument at 9% to 10% plus. Is that why there is so much growth in this industry?

Speaker 2: 11:49

Yeah, look, I think there's growth both from on the investor side and on the borrower side. You know investors are becoming more aware of this asset class and more comfortable with the fact that you know. They understand it better. They might have heard of it five years ago, I think. These days they actually you know that. They might have seen a number of times and they're quite familiar with it already and so understanding the risk in it before they make their investment. I think that's more prevalent now.

Speaker 2: 12:20

But also on the borrower side, I think borrowers and brokers are becoming more aware that this is a solution. Previously, that person who had a $100,000 deposit down and them and their broker weren't even aware that this was a solution, might have just done their money and lost a hundred thousand dollars because, because they couldn't get the funding on time, whereas these days, I think brokers and borrowers as well in the market are becoming more aware that there is a solution. You can eliminate that risk and solve that problem, um, and then go back to traditional funding. So I think there's more awareness on both sides of the coin for this and there's great growth happening on both sides.

Speaker 1: 12:59

So how interesting. Obviously, our listeners are a lot of people that are either studying finance or maybe work in another area, that are looking to enter into finance or want to become a fund manager in private credit. Can you talk us through your story from the beginning? What did you study at university and how did you get to where you are today?

Speaker 2: 13:19

Sure. So I did my undergrad in commerce, majoring in accounting and finance. So that's pretty specific. And then my first career was actually in working at a large public big four accounting firm as an accountant. So I did a couple of years there. What type of accounting did you do so? Financial accounting, working in audit for large listed companies?

Speaker 1: 13:46

And obviously what you do today audit is extremely important.

Speaker 2: 13:51

It was a very, very good way to sort of start a career and hone skills and understanding all this stuff. Absolutely yeah, it was one of the best training grounds I could have had.

Speaker 1: 14:04

Yeah, so from there, where did you go?

Speaker 2: 14:08

Yeah, so obviously I did two and a half years or so in financial audit and learnt a lot and was very grateful and then wanted to sort of expand my understanding of business and so I moved into management consulting and both of these opportunities with the firm. I previously worked with, Deloitte. I'm very grateful for my time there so I moved into management consulting.

Speaker 1: 14:32

Yeah, I was going to say for our audience that don't know what management consulting is, can you please share some insights?

Speaker 2: 14:37

Yeah, yeah, management consulting is always ask the consultant what a consultant does, and they'll never have an answer for you. Isn't that the old adage? Management consulting is advising businesses on how to solve typically complex problems, so what that may entail, it might be they might have a strategy problem, they might have an operations problem, they might have a technology problem, and typically you're advising very, very large, complex organizations where understanding the problem can be complicated, designing a solution can be complicated and actually executing the change within the organisation can be very, very complicated as well, and so bringing specialists in who can understand problems, design solutions and help execute change is often very valuable.

Speaker 1: 15:28

At the Finance Friends podcast. We love stories. Finance Friends podcast we love stories, so can you share a specific story about, maybe, a project that you were on and some learnings from that project?

Speaker 2: 15:41

Yes, yes, look, I can. So my area of, or the industry that I focused on, was, more broadly, financial services, so I worked for some banks and some large financial organisations. I think some things that I can share that I learned.

Speaker 2: 16:03

I think you can't underestimate the value of good people, and it's interesting when you get into very large organisations, how, if you have a small group of high-performing people, how effective that can be and sometimes that's all it takes is a handful of dedicated, capable, hardworking people to drive significant change across an organisation with thousands of people. And you know that really stuck with me about high performance teams and how do you create an environment where you've just got spectacular people? And you know I'm very grateful for my time at Deloitte and there were some wonderful people there and then. But when we went into these other large organisations you know I'm very grateful for my time at Deloitte and there were some wonderful people there, but when we went into these other large organisations, you know there were some pods of really spectacular people and it was amazing to see the impact that they would have in massive organisations.

Speaker 1: 17:04

Yeah, so is there one specific situation or project that comes to mind that you learnt a lot from that you've been able to implement in your current business?

Speaker 2: 17:15

yeah, no lots, but I probably I probably won't talk to them, if that's okay, any specific clients or anything like that. Um, just, obviously, you know the it's honoring that confidentiality of of who I consulted to, etc. Um, but you know I saw it across the board and you know that that that comment around um how to build great, it's really hard, really hard, and the best teams that I saw were led by people that one hired people who were better than themselves, two hired people that thought differently from themselves and three tried to give space to their teams to push ideas up and were happy to be wrong and happy to be challenged. And you know, when you have that sort of culture and that sort of environment, anything is possible.

Speaker 1: 18:13

So ultimately, you're going to get the best outcomes right if you're challenging more.

Speaker 2: 18:17

You're going to get the best decisions, the best calls from teams of amazing people who are all able to share ideas and have their ideas heard. That really stuck with me.

Speaker 1: 18:28

So in your business, if you are looking to hire, whether it be on the origination side, the capital raising side, what are the key skills that you look for? So, if someone was or does want to go into private credit, what skills do they need to be successful?

Speaker 2: 18:47

Yeah, so there's various pillars to our business. So I think, talking on the capital raising side, you know people who are great at raising capital. They understand the product extremely well, so they have a very good understanding of finance. They understand exactly what it is that we're, how we allocate capital, how we analyze risk, how to talk about risk, how to talk about returns, how to talk about the underlying loans that we're writing and really understand the mechanics of that. And you know that comes from understanding finance, understanding accounting and understanding property specifically to our fund.

Speaker 2: 19:38

But it's also a sensibility for broader economic issues. Why is this particular property a good property to be investing against at this point in the cycle, macroeconomically or microeconomically for that particular location? Why is allocating capital into private credit at this point good as part of a broader portfolio, as advised by your financial advisor when you're trying to execute an income strategy, more diversification, whatever it is, being able to talk about portfolio theory, being able to talk about property markets, being able to talk about macroeconomic issues. How do some overseas factors you know the recent drop in the Aussie dollar, how does that affect X, y, z? And so that real understanding of economics and finance and the mechanics of it all.

Speaker 2: 20:26

I think if you can understand that and then you've got, you know, an ability to go ahead and connect with people and be personable and talk to them and really you know, I think that's very effective. I mean, I tacked on the last bit last. That's probably the most important bit being able to understand investors and talk to them and obviously not making recommendations to them, but understanding, you know, connecting with them and being personable. But I think that actual technical knowledge and ability to understand what we do is critical.

Speaker 1: 20:57

So what do you most enjoy about your job?

Speaker 2: 21:01

Look, I think when I get in the morning I'm just grateful for the team I've got around me. It's amazing. That's what I love most. I love working with a team that you know we came and created this business together and it's just incredible. But I love most I love working with a team that you know we came and created this business together and it's just incredible. But I love all aspects. I love talking to investors. I love talking about the investment opportunities we have. You know, I love working with a team to sort of find new loans and bring them to fruition and looking at all the risk parameters of it and diving into the legal structures and legal issues. It's all fascinating.

Speaker 1: 21:37

And going from, obviously, what you're doing now and Best Capital. How big is the business? How many employees? How much money do you lend out or do you have under management whatever term you'd like to use?

Speaker 2: 21:50

Yeah, so we have a team of nine. We've been going for about two years and we've all got significant experience in finance, working at other funds or banks, et cetera, before, and you know many of us have worked together before as well, so we're growing very, very quickly. I think we've managed to, you know, double our funds under management in the last six months, and so you know that growth is management in the last, uh, six months, and so you know that that growth is really exciting and and, um, yeah, it's, it's. It'll be interesting to see what the next couple of years holds for us.

Speaker 1: 22:21

So yeah and this. I've loved this conversation. We can continue going forever, but one thing I'd like to ask you just to finish up has there been anyone that's been a big influence on your life and helped you to get to where you are today?

Speaker 2: 22:33

Yeah, my dad has been a huge influence in my life, how he's always had great humility and he's always taught me to just get up and have a go. You know Sometimes you know you're just getting a bit of a nudge. You know, going off, you go that, that that helps you know how important is that in what you do today?

Speaker 2: 23:04

it's been everything. It's been everything. You know it's um and you know we, our whole team shares that. You know there's we. We all go out there every day and we absolutely give it our best. Everyone's working incredibly hard and everyone shares that passion and and and that culture, and I think I think that's very much part of the culture that we have at best, capital it's. It's everyone is going out for the win and you know we're all, we've all got each other's backs and there's a, there's just a fantastic team culture there where everyone is celebrated and that's um. In my experience, that's that's rare and we've got to hold on to it as hard as we can yeah, and it can be difficult to retain that as the business grows no doubt um it's.

Speaker 1: 23:50

It's our number one priority as we Well. That's a great way to finish the podcast, Andrew. Thank you. Thanks, Fabian. It's been a pleasure and we'll share information on Best Capital on our socials. But thank you very much for coming in, Thanks for the opportunity and all the best in the future growth of the business. Thanks so much, Fabian Cheers.

Speaker 3: 24:12

Disclaimer this podcast exists for informational and entertainment purposes only. The personal opinions of the speaker and guests do not represent the view of any other party. If this recording contains reference to financial products, that reference does not constitute advice nor recommendations and may not be relied upon.