The Fund delivered +0.65% in November, 9.06% over 12 months and 9.37% annualised over three years continuing to deliver over 5% net return above the RBA cash rate.
As we noted in last month’s commentary, the Fund is carrying elevated cash balances ahead of a number of significant transactions scheduled to complete over the summer months. In structured credit, capital and deployment cannot always be perfectly aligned, particularly when transactions involve complex documentation and securitisation processes. These timing dynamics can cause monthly returns to move within a normal range, reflecting cash levels rather than credit outcomes. Portfolio performance remains consistent with expectations.
As we approach the end of 2025, we reflect on a year defined by strong capital flows, shifting economic conditions and increasing regulatory attention across the Australian credit market. Through these developments, our focus has remained unchanged: the Fund targets capital preservation and a stable, high level of income through disciplined structuring, deep due diligence and selective deployment.
2025 marked another step in the maturation of unlisted credit in Australia. Record levels of capital entered the market, supporting robust issuance across both public ABS and private transactions. This influx contributed to spread compression in several sectors and sharpened the need for genuine credit discipline. In an environment where capital was abundant, structure and selectivity - rather than availability of transactions - were the true differentiators.
Key Themes of 2025…
Record Capital Inflows and a More Competitive Market
Capital continued to flow into Australian credit at unprecedented levels, driven by the appeal of income-oriented strategies and ongoing volatility across equities. As a result, pricing tightened in public RMBS and ABS sectors, and competition increased across private markets.
Against this backdrop, our approach remained measured. We deployed only where risk, structure and counterparty quality aligned with our return target, supported by the breadth of a consistently deep pipeline.
Structure and Disclosure Under the Spotlight
ASIC’s heightened scrutiny, including the initial publication of Report 814 and subsequently 820, brought renewed attention to parts of the market where disclosures, valuation practices or income recognition lacked consistency. The distinction between genuine cashflow generating asset-backed facilities and structures reliant on capitalised interest became clearer, as did the focus on independent valuations, remuneration structures and the inconsistent use of terminology across the market.
We view this as a constructive development. Regulatory clarity helps investors better assess the varied risk profiles within the “private credit” category and underscores the importance of practices we view as foundational, including transparency and clear alignment of interests.
Slower Momentum, Stickier Inflation
Inflation in Australia proved more persistent than in many global markets, while forward indicators of growth softened. Although not recessionary, the combination of stickier inflation and weaker momentum reintroduced discussion around stagflation.
For credit investors, the relevance is practical. Portfolios must be positioned to perform when rates remain elevated even as growth slows. Throughout 2025, our focus remained on exposures where income is generated from borrower cashflow, supported by diversified, amortising loan pools and layers of structural protection. These frameworks are designed to support portfolio resilience across a wide range of macro conditions, rather than rely on a single economic scenario.
Yield Is the Outcome, Not the Asset
2025 saw an increase in strategies marketed primarily on absolute yield targets rather than on structure, collateral quality or underlying cashflow. In a higher rate environment, some funds maintained distribution levels by extending tenor, accepting thinner protection or relying on capitalised interest and non-cash income.
This created a widening gap between headline yields and underlying risk. Strategies that look comparable at a distribution level can carry materially different exposures once funding mechanics, borrower behaviour and structural protections are analysed. The absence of cashflow based income can indicate embedded leverage or dependence on principal rather than true earnings.
This divergence reinforced the importance of understanding how returns are generated. In contrast, the Fund remained focused on cashflow producing, asset-backed facilities with observable performance data and robust protections. Our priority continues to be sustainability of income, depth of structure and alignment with counterparties, rather than optimising to a published target.
A Decade of Consistency Through Cycles
As the Fund approaches its tenth anniversary, the past year has underscored the value of a disciplined, through the cycle approach. We have navigated periods of elevated liquidity, spread compression, policy uncertainty and economic transition without changing our mandate. Performance has typically reflected repeatable credit processes, transparent reporting and selective deployment.
Investor demand reached record levels in 2025. We continue to manage capacity carefully so that new inflows can be deployed into opportunities that meet the same standards that have underpinned the Fund since inception.
Looking Ahead to 2026…
We enter 2026 with a constructive but measured outlook. The Australian economy is adjusting to a higher-for-longer rate environment, and core credit performance remains fundamentally stable. Although competitive pressure is likely to persist in parts of the market, we continue to see opportunity in well structured, asset-backed facilities where consistent cashflow and strong protections contribute to stability across conditions.
