The Fund delivered +0.63% in January, 8.83% over 12 months and 9.31% annualised over three years continuing to deliver over 5% net return above the RBA cash rate.
The Fund is currently carrying a higher than targeted level of cash due to forthcoming transaction settlements. Typically, monthly fluctuations in returns are due to cash levels within the Fund.
Interpreting Credit Headlines in the Right Context
Recent months have seen continued media attention on developments across global credit markets. We are frequently asked how events offshore, or in other segments of lending, relate to the Manning Monthly Income Fund.
The starting point is recognising that “credit” is not a single asset class. It is a broad collection of lending models that differ materially by geography, regulatory framework, borrower type, income mechanics and structural design. Outcomes in one segment do not automatically translate to another.
This is particularly important when interpreting global headlines. Credit markets operate within different legal environments, enforcement regimes and lending conventions. Borrower behaviour, collateral recoveries and restructuring processes can vary significantly across jurisdictions. These differences shape how risk is taken, how losses emerge and how investors are ultimately protected.
Equally, even within a single geography, the term “credit” now captures a wide spectrum of strategies, including non-investment grade corporate lending, construction and development finance, and structured asset-backed facilities, the latter being what the Manning Monthly Income Fund invests in. These are all fundamentally different forms of risk exposure, despite often being discussed interchangeably.
Credit Market Structure and the Fund’s Position Within It
Much of the stress reported in credit markets has been concentrated in segments characterised by concentrated exposures, borrower-level dependency and valuation sensitivity. This is typical of mid-market corporate lending and construction or development finance, where outcomes are heavily influenced by refinancing conditions, asset values and borrower performance.
In non-investment grade corporate lending in particular, the underwriting framework is fundamentally a borrower cashflow assessment. Capital is typically provided to a single corporate borrower, and repayment depends on the operating performance of that business. While security may be taken over assets, those assets do not themselves contractually generate the income used to service the loan. In that sense, repayment remains linked to enterprise value and cash generation at the borrower level.
Asset-backed securities/finance operate differently. A transaction is structured around pools of financial assets that themselves typically generate contractual cash flows, which flow through the structure and service the funding. The performance of the assets, rather than the financial health of a single corporate borrower, drives repayment. Risk is managed at the structure level through eligibility criteria, performance triggers and cashflow controls that operate automatically as portfolio metrics change.
The distinction is structural rather than conceptual, and these are fundamentally different lending structures that behave differently through the cycle.
We are increasingly seeing the term “asset-backed” applied to transactions where the underlying exposure is, in substance, corporate cashflow lending secured by assets. In these cases, repayment ultimately depends on the operating performance of a single business, even where assets are pledged as collateral. The assets may support recovery, but they are not the primary mechanism through which the funding is serviced.
In the Manning Monthly Income Fund, repayment is linked to the performance of an asset pool within a defined financing structure. Even where underlying loans may capitalise interest or amortise over time, the funding itself is supported by contractual payment waterfalls, performance triggers and credit enhancement mechanisms that govern how cash is generated, allocated and protected.
Understanding where repayment is structurally sourced, e.g. from borrower enterprise cashflow or from an asset pool operating within a defined structure, is central to assessing how risk is transmitted and managed.
Maintaining Credit Discipline
Current market conditions continue to reflect strong investor demand for income-focused strategies. In some parts of the market, this has resulted in tighter pricing, reduced covenant protection and pressure to maintain headline yield despite changing funding conditions.
In this environment, maintaining credit standards requires discipline. Protecting structure, diversification, and income quality can mean accepting slower deployment rather than compromising underwriting parameters.
As always, our emphasis remains on understanding how income is generated, how risk is absorbed and how structures behave when conditions change. Developments in other segments of the credit market do not alter these fundamentals, but they do reinforce the importance of distinguishing between very different lending models operating under a common label.
