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 an 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.
