The Manning Monthly Income Fund delivered +0.68% in April, 8.44% over 12 months and 9.20% annualised over three years. Since inception, the Fund has delivered an annualised return of 7.33%, continuing to exceed its objective of net returns of over 5% above the RBA cash rate.
10 Years of Disciplined Credit Investing
April marked a significant milestone for the Fund, reaching its 10-yeartrack record. Over the past decade, the Fund has delivered through a wide range of market conditions, including COVID-related dislocation, several major geopolitical conflicts and wars, the fastest interest rate tightening cycle in Australia in decades, inflationary pressure, liquidity shocks and periods of significant volatility across equity and fixed income markets. Throughout that time, the Fund has remained focused on the same objective: preserving investor capital while delivering a high and consistent level of income through disciplined, conservatively structured asset-backed credit exposures. Importantly, over its 10-yearhistory, the Fund has never experienced a negative monthly return from credit losses. We believe this consistency reflects the strength of the Fund’s disciplined underlying investment philosophy and unwavering focus on capital preservation through the cycle.
Policy Change, Inflation and Credit Markets
Recent months have seen an increasing focus on the interaction between fiscal policy, inflation and credit markets. The recent Federal Budget, evolving expectations around interest rates, and ongoing adjustments in property market conditions are all contributing to a more selective lending environment.
For credit investors, the relevance of these developments is less about predicting any single macroeconomic outcome and more about understanding how changing conditions influence borrower behaviour, refinancing dynamics and the quality of underlying collateral over time. Without taking a view on the policy itself, in periods when liquidity becomes more discerning, and policy settings evolve, differences in underwriting standards, portfolio construction, and structural protections tend to become increasingly important. Importantly, this does not imply broad deterioration across credit markets. Rather, it reinforces the distinction between lending exposures primarily supported by durable borrower cash flows and conservative collateral positions, and those more dependent on continued valuation growth, refinancing availability, or favourable market conditions.
As has already been written about extensively across financial markets following the Federal Budget, a number of proposed tax and housing policy changes may influence investor behaviour and financing markets over time. From 1 July 2027, the Government has proposed limiting negative gearing on residential property to new builds, while also replacing the current 50% capital gains tax discount with a system of cost base indexation and a minimum effective tax rate on capital gains. Whether implemented in their current form or not, these proposals are already contributing to a reassessment of long-term property investment assumptions and financing dynamics. At the same time, inflation remains above the RBA’s target range, with the cash rate increasing to 4.35% in May and trimmed mean inflation continuing to track above target. While inflation has moderated from peak levels, the adjustment process has been slower than many market participants initially expected. The practical implication for credit markets is that funding costs, borrower serviceability, and refinancing assumptions remain more important than they were during the low-rate environment of recent years.
Where Risk is Most Exposed
The transmission of these conditions through credit markets is uneven. Higher rates, changing tax settings and slower property market turnover do not affect all lending exposures equally. The impact depends on how the loan is repaid, how conservative the advance rate is, how quickly the exposure amortises and the extent to which repayment relies on refinancing, asset sales or valuation uplift.
In our view, this environment places greater emphasis on understanding where repayment is structurally sourced. Lending strategies reliant on single corporate borrower success/cash flow, project completion, development sales, residual stock realisations or high LVR refinancing assumptions can behave very differently once liquidity conditions become more selective. This is particularly relevant in construction and development finance, where repayment outcomes may depend heavily on future market conditions rather than existing borrower cashflows.
This is not a prediction of widespread stress across Australian property or credit markets. Australia continues to benefit from structural supports, including relatively low unemployment, population growth and a tightly regulated banking system. However, periods of adjustment tend to expose the difference between lending models that are structurally resilient and those more reliant on continued market momentum.
The Fund remains deliberately positioned away from any form of construction finance or development-related exposures. Within consumer lending, we also remain very cautious given ongoing pressure on household balance sheets and the cumulative impact of inflation and elevated interest rates.
The Fund currently holds over 78,000 individual asset exposures. In asset-backed credit, diversification is not a marketing point. It is a core risk mitigant. It reduces reliance on any single borrower, asset, or exit event and allows performance to be assessed through observable repayment behaviour across the pool.
Suddenly A Better Environment for Disciplined Capital
The opportunity set is also shifting. During much of last year and early this year, strong capital inflows into credit contributed to tighter pricing, weaker covenants and increasing pressure across parts of the market to maintain deployment. In some areas, this dynamic allowed borrowers and originators to negotiate terms that were significantly less favourable to funds/capital providers, particularly where managers faced strong inflows and limited capacity to hold elevated cash balances for extended periods. That dynamic is now changing. As funding markets become more selective and some participants pull back, we are seeing a greater number of attractive opportunities where stronger protections can be negotiated. This includes more conservative advance rates, tighter eligibility criteria, stronger arrears triggers, and more robust cashflow controls.
This is the environment in which alignment becomes increasingly important. A credit manager’s role is not simply to deploy capital. It is to determine when capital should be deployed, on what terms, and with what protections. In periods of abundant liquidity, the pressure to maintain deployment can lead to weaker structures and higher risk being transferred to investors. In more selective markets, patient capital can require more from lenders. For investors, this distinction is critical and becomes particularly important during periods where macroeconomic conditions, inflation, and policy settings are evolving simultaneously. Higher returns in credit should not come from accepting weaker protections or moving up the risk curve. They should come from being paid appropriately for risk, with structures that are designed to preserve capital if conditions deteriorate.
The Fund is currently in the later stages of progressing several larger transactions, which, if completed, are expected to further enhance overall portfolio quality and portfolio economics. Consistent with the nature of structured and asset-backed credit, these transactions involve detailed due diligence, legal negotiation and multi-party execution processes and therefore remain subject to completion risk until fully settled.
Positioned for the Current Environment
The Fund’s mandate provides flexibility to allocate across mortgage, business and consumer-backed exposures where we believe risk-adjusted returns are attractive. Importantly, that flexibility allows us to move away from sectors where risk is increasing and toward areas where collateral quality, borrower behaviour and structural protections remain more favourable.
As the broader market adjusts to a more selective lending environment, we believe the importance of conservative structuring, diversification and disciplined underwriting will continue to increase. The Fund remains focused on targeting a high level of income while preserving investor capital through selective deployment, active risk management and a consistent through-the-cycle investment approach.
