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The Manning Credit Opportunities Fund delivered +1.07% in August 2026, bringing net returns to 13.29% over 12 months, 14.58% per annum over three years and 14.53% per annum since inception in July 2022.

The Fund targets the RBA cash rate plus 10% per annum over rolling five years. Over three years the Fund exceeded the cash rate by 10.46% per annum, and by 9.34% over the past 12 months.

Returns are inclusive of distributions, net of fees and exclude tax. Past performance is not a reliable indicator of future performance.

The Origins of the Strategy

The Credit Opportunities Fund began somewhat differently to a conventional fund launch. Before MCOF existed, we had identified and invested in a number of individual credit opportunities that sat outside the natural mandate of the Manning Monthly Income Fund. These were typically finite, more complex transactions where the underlying credit was attractive, but the structure or circumstances allowed us to negotiate returns above those available in more conventional parts of the market.

Initially, these investments were made available individually to a small number of longstanding Manning clients. As the opportunity set developed, the Fund was established in 2022 to bring these transactions together within a dedicated strategy.

That history remains relevant to how MCOF is managed today. The Fund was not established around a target level of assets under management and then tasked with finding investments to fill it. It has spent much of its life closed, with additional capital raised selectively as suitable opportunities emerge. That approach is particularly important for a strategy targeting a return of RBA Cash +10% per annum, where excess capital sitting in cash can dilute the economics of the portfolio.

Getting Paid More for Risk

At its simplest, the objective of MCOF is not to take more risk in order to generate a higher return. We have a defined risk appetite and seek opportunities where the Fund can be paid more for risks we are prepared to accept.

That distinction is important. There will be periods when capital is abundant, competition is high and the additional return available for taking a particular credit risk is simply not sufficient. At other times, liquidity becomes less readily available, funding requirements change or particular parts of the market become dislocated. The underlying risk may not have changed to the same extent as the price available for providing capital.

It is in those circumstances that the Fund's mandate becomes particularly relevant. A transaction that did not meet our return requirements six months earlier may become attractive at a different price, with stronger structural protections or on better commercial terms. Equally, a higher headline return does not make an opportunity suitable if achieving it requires moving outside our risk appetite.

An Opportunities Fund

MCOF is intended to have the flexibility to invest when particular opportunities present, rather than maintain a predetermined allocation to individual segments of the credit market.

We remain cognisant of the economic outlook and the potential for a more challenging environment to affect underlying borrowers and asset performance. That does not mean changing the Fund's risk appetite in anticipation of higher returns. Rather, it means maintaining that risk appetite and being positioned to deploy when changing liquidity conditions, funding pressures or market dislocation create unusually attractive pricing or structures for risks we already understand and are comfortable underwriting.

Periods of uncertainty will not make every transaction more attractive. In many cases they will make us more cautious. However, they can also create exactly the type of finite, less conventional opportunities for which MCOF was originally established.

The Manning Monthly Income Fund delivered +0.67% in August 2026, bringing net returns to 8.29% over 12 months, 9.08% per annum over three years, 8.54% per annum over five years and 7.36% per annum since inception in April 2016.

The Fund targets the RBA cash rate plus 5% per annum over rolling five years. Over five years the Fund exceeded the cash rate by 5.31% per annum, and by 4.34% over the past 12 months. Returns are inclusive of distributions, net of fees and exclude tax. Past performance is not a reliable indicator of future performance.

Private Credit: One Label, Different Sources of Repayment and Risk

Recent headlines have again treated private credit as though it were one market. It is not.

The term has become so broad that published estimates of the Australian private credit market range from approximately $40 billion to $200 billion, depending on what is included. The RBA’s narrower estimate focuses primarily on managed fund lending to businesses, while ASIC’s broader estimate includes corporate lending, real estate and asset-backed finance.

Both figures can be correct. They are simply measuring different things.

This is more than a question of definition. The words “private credit” describe how lending is originated and held. They tell investors very little about the borrower, the source of repayment, the underlying security or what needs to occur for investors to be repaid.

The recent failure of a large Australian property developer, involving numerous private lenders, has understandably increased investor concern. The issues arising from that failure are serious and may have broader consequences within property development finance. However, they should be assessed in the context of that segment, rather than treated as evidence that every privately originated loan carries the same risk.

What Actually Sits Inside Private Credit?

ASIC broadly divides the Australian private credit market into three segments: corporate and commercial lending, real estate lending and asset-backed finance. Distressed and equity-like investments can also sit within each of these categories.

While these strategies are frequently grouped together, their sources of repayment and potential loss pathways are fundamentally different.

Corporate and Commercial Lending

Corporate private credit generally involves lending directly to an operating business. This can include senior secured loans, unitranche facilities, sponsor-backed lending, subordinated or mezzanine debt, venture debt and distressed lending.

The primary source of repayment is usually the operating cashflow and enterprise value of the business. Security may be taken over company assets, but those assets do not necessarily generate the income required to service the loan. They principally support recovery if the business cannot repay.

The relevant risks therefore include the financial performance of the business, its leverage, sector exposure, customer concentration, management capability and ability to refinance.

Real Estate Lending

Real estate credit is itself a broad category. It can include lending against established residential or commercial property, bridging finance, residual stock, land acquisition, construction and property development.

The distinction between these activities is critical.

A loan against an existing, income-producing property may be repaid from rental income, the sale of an established asset or refinancing based on its current value. Construction and development finance requires a series of future events to occur. A project may need to be completed on time and within budget, presales must settle, market values must hold and refinancing or sales liquidity must remain available.

These risks can also become correlated. Higher construction costs, project delays, weaker buyer demand, lower valuations and tighter refinancing conditions can occur at the same time.

A registered first mortgage remains an important protection, but it does not by itself determine the quality of the exposure. Investors also need to understand the valuation basis, the amount of genuine equity beneath the lender, whether interest is being paid in cash or capitalised, and how much of the expected value depends on a project that has not yet been completed.

Asset-backed Finance

Asset-backed finance includes structured lending against pools of residential mortgages, auto and equipment loans, consumer receivables, business loans and other financial assets.

Rather than depending on the performance of a single corporate borrower or the completion of a development project, repayment is generated by contractual payments from a diversified pool of underlying borrowers.

In a properly structured warehouse facility, the assets are held within a dedicated, bankruptcy-remote vehicle and cash is distributed through an agreed payment waterfall. Eligibility and concentration criteria control what can enter the pool, while arrears, loss and net interest margin triggers can redirect cash and accelerate repayment if performance weakens. The originating lender will also generally contribute first-loss capital beneath the funding provider.

Underwriting quality, servicing, asset performance and the level of structural protection remain critical. However, the way risk arises and is absorbed is different from a loan whose repayment depends on a single business, property or development outcome.

Considering Risk in the Context of the Underlying Assets

Identifying the segment is only the starting point. Risk also depends on how the exposure is structured within that segment.

A manager may invest at the senior or subordinated level, use fund-level leverage, hold a concentrated or diversified portfolio, receive cash interest or capitalised interest, and offer investor liquidity that may or may not match the underlying assets.

Consequently, two funds offering a similar headline return may be taking very different risks to generate it. One return may be supported by contractual cashflows from a diversified asset pool and a substantial layer of first-loss protection. Another may depend on a small number of leveraged borrowers, future property sales, refinancing or an increase in asset values.

Before drawing conclusions from a headline, investors should understand who the ultimate borrowers are, where repayment is expected to come from, whether that repayment already exists as contractual cashflow or depends on a future event, how concentrated the exposure is and where losses will be absorbed if performance deteriorates.

Without that information, the return alone says very little.

Where the Fund Sits

The Manning Monthly Income Fund operates within asset-backed finance. Manning provides structured funding to approximately 25 specialist non-bank lenders across residential mortgage, business and consumer lending.

The Fund’s exposure is to diversified pools containing more than 75,000 individual financial assets. These assets sit within defined financing structures supported by features such as lender first-loss capital, eligibility and concentration criteria, performance triggers, reporting requirements and cashflow controls.

The Fund has no exposure to construction finance. Nor is its repayment dependent on the operating performance of a single leveraged corporate borrower.

Our role is also distinct from that of the underlying non-bank lenders. Those lenders originate and service loans to individual borrowers. Manning provides wholesale funding against eligible pools of those loans and controls how capital and cashflow move through each facility.

The Fund remains focused on delivering a high level of monthly income while targeting capital preservation through diversified asset-backed exposures, disciplined structuring and active portfolio management.

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The Manning Credit Opportunities Fund delivered +1.10% in July 2026. To 31 July 2026, returns were 13.14% over 12 months, 14.62% per annum over three years and 14.54% per annum since inception in July 2022.

The Fund targets the RBA cash rate plus 10% per annum over rolling five years. Over three years the Fund exceeded the cash rate by 10.51% per annum, and by 9.25% over the past 12 months.

Returns are inclusive of distributions, net of fees and exclude tax. Past performance is not a reliable indicator of future performance.

Portfolio Activity

Two existing lenders drew on their facilities during July, with the portfolio continuing to perform in line with expectations.

As we noted last month, MCOF is a particularly active portfolio. New drawdowns are only one side of that activity. More than 90% of the underlying loans across the portfolio are either amortising or held within revolving structures, meaning principal is continually being repaid as underlying borrowers make scheduled repayments or refinance. Within revolving facilities, that capital can then be recycled by the non-bank lender into new eligible loans, subject to the credit and structural parameters of the facility. As a result, there is considerably more activity occurring within the portfolio than the headline level of Fund deployment might suggest.

This is an important characteristic of the strategy. Even where our commitment to a facility remains unchanged, the underlying collateral pool can continually evolve as loans repay and new eligible assets are funded. We monitor that activity closely, including underlying loan performance, collateral composition, concentration limits and compliance with the structural protections of each facility. At the Fund level, repayments and changes in facility utilisation also create opportunities to reassess where capital is best allocated across the portfolio.

Portfolio Construction

For MCOF, diversification is more nuanced than simply the number of lenders or facilities in the portfolio. We consider the underlying borrowers and collateral, repayment characteristics, concentration risks and the extent to which different exposures may behave similarly under changing economic conditions.

The Fund's broader mandate is particularly valuable in this context. It allows us to allocate across different forms of specialist lending and asset-backed finance rather than being required to maintain exposure to a particular segment of the market. This flexibility means the portfolio can evolve as relative value changes, while remaining focused on transactions that meet the Fund's higher risk adjusted return requirements.

Where Scale Is Not an Advantage

Some of the more interesting opportunities we assess for MCOF are attractive precisely because they are not particularly scalable. Smaller or finite transactions can be less suited to large pools of institutional capital, despite having strong underlying credit characteristics. This can reduce competition and create opportunities for more bespoke structuring and pricing.

For MCOF, the objective is not to find the largest transactions or maximise the amount of capital deployed with any one lender. The Fund's higher return target means each opportunity needs to justify its place in the portfolio. In some cases, that may be a larger facility capable of growing over time. In others, it may be a finite pool of assets or a highly structured transaction where the economics are attractive precisely because the opportunity cannot readily be scaled.

The Manning Monthly Income Fund delivered +0.65% in July 2026. To 31 July 2026, returns were 8.36% over 12 months, 9.11% per annum over three years, 8.51% per annum over five years and 7.35% per annum since inception in April 2016.

The Fund targets the RBA cash rate plus 5% per annum over rolling five years. Over five years the Fund exceeded the cash rate by 5.35% per annum, and by 4.47% over the past 12 months. Returns are inclusive of distributions, net of fees and exclude tax. Past performance is not a reliable indicator of future performance.

Portfolio Outlook

The Fund continues to carry a higher than targeted level of cash while several larger transactions progress through due diligence, documentation and settlement. This may moderate returns in the short term. However, we remain comfortable allowing deployment to occur methodically as the opportunity set continues to improve. With participation from competing funding providers reducing, we are seeing increasingly attractive risk-adjusted opportunities, including better pricing, stronger structures and, in some cases, access to higher quality underlying borrowers than was available when capital was more abundant. This continues the trend we discussed last month, where reduced participation across parts of the market was beginning to improve both transaction economics and investor protections.

Different Property, Different Risk

Property has featured heavily in credit headlines recently, with specific examples from particular segments of the market often discussed in the context of property-backed lending more broadly. However, from a credit perspective, significant differences exist between the various forms of property exposure. An established house in a metropolitan suburb, a rural property, a luxury residence, a development site acquired for its rezoning potential and a partly completed apartment project may all sit beneath the broad heading of “property”, but their underlying risk characteristics are very different.

The ability to readily sell the property at the current valuation (liquidity), the depth of the potential buyer pool, reliance on planning or construction outcomes, the price of the property compared to suburb averages and the profile of the expected buyer all vary materially. As a result, weakness in one segment of the property market does not necessarily tell us very much about the credit performance of another.

The same principle applies across other forms of lending. Stress among a particular group of US software companies, for example, would tell us relatively little about the outlook for a diversified pool of asset-backed business loans in Australia. The broad category may be the same, while the underlying credit exposure is quite different.

Therefore, for us, the relevant question is not simply whether an exposure is secured by property. The questions are: what property, at what valuation, with what level of leverage, supporting what size loan and with how many realistic avenues to repayment?

Where We Invest

Within the Fund’s mortgage exposures, our preference is predominantly for established residential property in major metropolitan markets. We favour collateral with existing utility: property that can be occupied, rented or sold today, without its value depending on construction being completed, a rezoning occurring or a particular development outcome being achieved.

We also favour granularity. Smaller loans spread across large numbers of borrowers and properties provide a very different risk profile from a portfolio built around a limited number of large individual property exposures. The objective is that the performance of any one borrower or property should not determine the outcome for Fund investors.

The Fund does not invest in property construction finance. We do not regard these as through-the-cycle assets given their greater reliance on project completion, future sales, refinancing conditions and valuations that may depend on an asset reaching a different state in the future. This has been a deliberate feature of the Fund strategy throughout our history, rather than a tactical response to current market conditions.

We are similarly selective around large individual property loans, highly specialised or rural assets and more speculative property where the valuation or recovery may depend on a relatively narrow pool of buyers. These distinctions become increasingly important when property conditions are less buoyant. An existing asset with utility, a conservative LVR and a deep secondary market has very different recovery characteristics from an asset whose value depends heavily on what it may become several years from now.

There can also be advantages to lending after property markets have moved away from peak conditions. Valuations established in a more conservative environment can provide a better starting point for a lender than valuations formed during periods of exceptionally strong demand. We would rather lend against a supportable value today than require continued asset price appreciation or future valuation uplift for the credit to work.

Bank Appetite and the Non-Bank Market

There is another side to a more cautious property and lending environment which can be particularly relevant for non-bank lenders.

Banks are generally the lowest cost source of finance for Australian borrowers. When banks are competing aggressively and have a strong appetite for credit, they naturally retain a greater proportion of high-quality borrowers. Non-bank lenders are therefore competing across a narrower pool of customers, often comprising borrowers seeking greater flexibility, speed or loan structures outside traditional bank parameters.

As bank appetite becomes more selective, that non-bank opportunity set can expand. Borrowers with strong credit characteristics and good-quality assets who may previously have obtained bank finance can increasingly move into the non-bank market. For specialist lenders, and ultimately funding providers such as us, this can provide access to a broader universe of high-quality lending opportunities.

We have two dynamics occurring at the same time. A more challenging economic or property outlook warrants greater caution around leverage, valuations and borrower selection. At the same time, reduced competition can improve borrower quality, create more conservative entry valuations and allow better pricing and stronger lending terms.

For a credit investor, this can turn a more uncertain backdrop into an attractive deployment environment, provided the manager has the flexibility and patience to select the opportunities that benefit from that change, while avoiding the areas where risk is increasing.

Allocating Through the Cycle

Zooming out, the Fund is a diversified credit strategy, not a mortgage/property fund. Its mandate allows us to allocate across mortgage, business and consumer backed exposures according to where we believe the best risk-adjusted returns are available. Property remains an important part of that opportunity set because the Australian residential market provides a very large and comparatively liquid pool of real assets to lend against. However, there is no requirement for the Fund to maintain a particular exposure simply because it has held it historically.

That flexibility is particularly valuable through a cycle. If risk increases in one segment, capital can be allowed to repay and redeployed elsewhere. If reduced bank appetite creates an unusually attractive opportunity in high-quality residential mortgages, we can increase exposure. If business backed lending offers stronger collateral and more attractive economics, capital can move in that direction instead. The objective is not to maintain a static asset allocation, but to continually allocate towards the areas where borrower quality, asset protection, structure and return are most attractive. This flexibility across mortgage, business and consumer backed exposures has long been central to the Fund’s approach.

The breadth of the Fund also matters. We provide funding across over 20 specialist lenders, multiple sub-asset classes of credit, geographies and tens of thousands of underlying loans. This means the portfolio is not reliant on a small number of properties, borrowers or exit events to determine the outcome for investors.

As the Fund moves through its eleventh year, we believe the current environment is increasingly attractive for a credit investor with capital available, a broad opportunity set, and the ability to remain selective. The Fund has already operated through periods of significant dislocation, rapid changes in interest rates, liquidity shocks and different property cycles while maintaining its focus on a high and consistent level of income and capital preservation.

A ‘through the cycle approach’ is not about predicting each change in property prices, bank appetite or the broader economy. It is about having the mandate, relationships and discipline to adjust as those conditions change. At present, that means continuing to take our time with deployment, staying away from areas where we believe risk is poorly rewarded and using a more selective funding environment to build exposure to increasingly attractive opportunities as they emerge.

The Manning Credit Opportunities Fund delivered +1.12% in June and 13.17% over the past 12 months. Since inception, the Fund has delivered an annualised return of 14.55%, continuing to exceed its objective of net returns of over 10% above the RBA cash rate.

Portfolio Activity

Five existing lenders drew on their facilities during June, reflecting continued activity across the portfolio and the depth of our long-standing lending relationships. The portfolio continues to perform in line with expectations, supported by a diversified range of asset-backed facilities and consistent underlying borrower performance.

One aspect of the Fund that is often less visible is the level of ongoing portfolio activity. While new drawdowns naturally receive attention, capital is also continually being repaid and reallocated as underlying borrowers repay or refinance their loans and our non-bank lenders recycle capital through their funding facilities. This creates an active portfolio, with capital continually being redeployed into opportunities that meet the Fund’s return and risk requirements.

Maintaining the Fund's Return Profile

The Fund has a relatively high target return and, by extension, a comparatively high cost of funds. Maintaining this return profile requires the continual sourcing, assessment and execution of new opportunities, even when the portfolio is performing in line with expectations.

While the current market continues to present attractive opportunities, only a relatively small proportion ultimately meet the Fund's credit, structural and return requirements. Our focus remains on identifying transactions where structure, security and pricing combine to deliver attractive risk-adjusted returns, rather than deploying capital simply to increase portfolio size.

Consistent with this, we are seeing an increasing number of opportunities secured by real property. The Fund's broad mandate allows us to assess opportunities across multiple segments of the credit market as relative value evolves.

Outlook

The pipeline remains healthy and we continue to progress a number of opportunities through various stages of due diligence and structuring. As always, deployment will remain selective, with capital allocated only where opportunities meet the Fund's disciplined credit standards and risk-adjusted return requirements.

The Manning Monthly Income Fund delivered +0.66% in June, 8.45% over 12 months and 9.15% annualised over three years. Since inception, the Fund has delivered an annualised return of 7.35%, continuing to exceed its objective of net returns of over 5% above the RBA cash rate.

#1 Diversified Credit Fund for FY26

We were pleased to see the Manning Monthly Income Fund ranked by Livewire Markets as the top performing diversified credit fund for FY26, with a net return to investors of 8.45%. This follows the Fund’s recognition as the top-performing Australian fixed interest fund for FY25.

League tables naturally change from year to year, but this recognition is particularly pleasing as the Fund enters its eleventh year.

The Fund’s performance is not the result of a strong single year or a favourable market cycle. It reflects more than a decade of delivering a high and consistent level of monthly income, with no negative monthly returns arising from credit losses since inception.

Importantly, these results have been achieved without focusing on construction or property development finance, concentrated non-investment-grade corporate lending or moving further up the risk curve. They reflect the same disciplined approach that has underpinned the Fund since inception: deploying only where the risk, structure, counterparty quality and investor protections meet our standards, and accepting slower deployment rather than compromising on capital preservation.

30 June: A Valuation Test for Credit Funds

Ahead of the financial year end, ASIC put credit funds on notice to ensure their 30 June asset valuations are current, accurate and based on realistic assumptions.

ASIC described the sector as entering its first real test, with pockets of higher defaults, impairments and loan amendments beginning to emerge. It also identified the risk of valuations lagging economic reality, particularly in property development, and inconsistencies in how funds define arrears, impairments, amendments and provisions.

ASIC’s message was clear. Managers should not wait for a formal default before reassessing the value and risk of an investment.

This matters because reported returns can appear stable for some time if deteriorating assets are not appropriately valued or losses are not fully recognised.

In our view, an impaired investment is not necessarily made whole simply because an originator, manager or related entity provides a corporate undertaking or records an amount owing to the fund. That support must itself be enforceable, appropriately valued and recoverable. Otherwise, the economic shortfall may remain, even though the investment continues to be carried at or near its original value.

These issues are particularly relevant in vertically integrated structures where the same group originates the loan, manages the fund, services the borrower and has influence over valuation and impairment decisions. Vertical integration is not inherently problematic, but it creates conflicts that require genuine independence and strong governance. ASIC has specifically highlighted the increased conflict risk where valuation and impairment decisions may be affected by misaligned incentives during periods of stress.

The Fund Today

Manning provides structured funding to circa 25 specialist non-bank lenders across a broad range of asset-backed lending sectors.

As we enter the new financial year, the Fund is now in its eleventh year and remains positioned as intended. It has operated through COVID, liquidity shocks, rapid monetary tightening, periods of significant market volatility and changing economic conditions, while continuing to deliver a high and consistent level of income and preserve investor capital.

We are also entering a more attractive environment for new deployment. Participation across parts of the credit market has reduced, competitive pressure is easing and we are seeing opportunities with improved pricing, stronger structures and better investor protections. The Fund has recently carried a higher level of cash as several transactions progress through documentation and settlement, rather than compromising on quality simply to remain fully deployed.

The strength and stability of our investor base allows us to remain patient and selective while these opportunities progress. We thank investors for their continued support and remain focused on deploying capital where the structure, return and downside protections are appropriately aligned.