Investing strategically.
Managing actively.

The Fund delivered +0.71% in September, 9.22% over 12 months and 9.39% annualised over three years continuing to deliver over 5% net return above the RBA cash rate.

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The Breadth of Credit Markets

The discussion around “private credit” continues to grow, but the label now captures a remarkably wide set of strategies from institutional asset-backed finance to property development lending, mezzanine construction loans and leveraged non-investment-grade corporate debt. These sectors differ not only in borrower type and collateral quality but also in structure, liquidity, and performance through the cycle.

The Manning Monthly Income Fund operates exclusively within asset-backed finance, where each exposure is supported by enforceable collateral, eligibility criteria and loan-level data. Returns are generated from cashflow, not revaluation, and structures are designed to withstand stress scenarios, not rely on benign conditions. This is a fundamental distinction within the broader “private credit” conversation - one that continues to be overlooked in aggregate industry media reporting.

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What Regulators are Highlighting

ASIC’s Report 814 has drawn attention to inconsistencies across the market - particularly in valuation practices, disclosure of non-cash distributions, and the use of terms such as “senior,” “secured,” and “investment grade” without a consistent or externally verified basis. The report distinguishes between income-producing credit, where interest is paid in cash, and construction or development lending, where interest is often capitalised or paid from loan drawdowns. This is more than semantics. If the underlying loans don’t generate cash interest, the fund’s distributions are being funded from investor capital or new investor inflows, not portfolio income. Similarly, LVRs based on “as if complete” assumptions or unverified valuations can obscure true exposure. We welcome regulatory focus in this area - it supports the evolution toward better investor understanding and aligns with the transparency standards we have maintained for years including independent valuations, third-party credit ratings and detailed portfolio composition reporting

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Structure Drives Outcome

In an environment where capital continues to chase yield, we remain focused on sustainability - the quality of income and the repeatability of outcomes. Our philosophy remains that structure determines outcome: facilities typically include multiple layers of protection – conservative eligibility tests, cashflow-based covenants, and early-amortisation mechanisms that can redirect cash when performance metrics tighten.

Our approach prioritises alignment and control over theoretical ranking in the capital stack. As the Fund nears its 10-year track record, our experience has shown that well-engineered structures and active monitoring, rather than tactical positioning, are what deliver consistent outcomes through market cycles. As capital continues to flow into the sector and new entrants emerge, we see growing value in the disciplines that have underpinned our approach - deep transparency, conservative structuring, and active monitoring of every underlying loan pool. In an environment where definitions vary and oversight is tightening, doing the fundamentals well remains the most reliable source of performance.

As the Fund approaches its 10th anniversary, it continues to experience record levels of investor demand reflecting confidence in its consistency and approach. We remain highly selective in deploying new capital and maintain strict capacity limits to preserve performance integrity. In recent months, applications have been temporarily closed once capacity was reached. Applications are processed on a first-come, first-served basis, so we encourage investors to apply earlier in the month when the application portal is open. While this can sometimes be disappointing for investors in the final days of the month, managing capacity carefully is ultimately in the best interests of existing unitholders and ensures that growing investor demand is deployed with discipline and selectivity.

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The Fund delivered +0.73% in August, 9.32% over 12 months and 9.35% annualised over three years continuing to deliver over 5% net return above the RBA cash rate.

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Structure Before Return

In credit, capital protection is determined well before the first dollar is deployed. Every facility in the portfolio is structured with clear and measurable protections, for example: arrears and cumulative loss triggers that redirect cash to protect us, eligibility criteria that prevent an adverse drift in the underlying pool, and structural features that redirect excess income early when metrics weaken. These controls are not theoretical - they are enforceable tests that turn off originator distributions and accelerate deleveraging when our thresholds are breached.

Importantly, we focus not just on where we sit in the capital stack, but on the quality of the loans and the structure in which they're held. For example, a mezzanine position behind a major bank senior can often present a more resilient profile than a “senior” exposure with minimal first-loss protection and less robust assets. Bank funded facilities are typically larger and more diversified, with borrower interest rates low enough to attract higher quality credit profiles. They are governed by institutional standards, require comprehensive reporting, and usually embed sophisticated protections such as step-in rights, early-amortisation triggers and eligibility tests that can protect investors long before permanent impairment occurs.

The objective is not to own the highest-ranking piece for its own sake, but to position the Fund where risk is appropriately priced and where the structure and counterparties give us confidence that capital can be preserved through the cycle.

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Listed Credit

Recent months have seen a resurgence of listed credit vehicle issuance, with managers introducing buybacks, NAV-support frameworks and other mechanisms aimed to address persistent discounts. These are welcome developments, provide retail investors with greater access and signal the broader maturation of the asset class. History shows, however, that listed debt instruments can trade at deep and prolonged discounts to NAV during market dislocations - as in 2020 and other periods - often driven by sentiment and secondary market liquidity rather than deterioration in underlying collateral. Whether these innovations will materially change investor behaviour when volatility returns remains to be seen. Price volatility is ultimately driven by market liquidity, not just vehicle design.

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Filtering For Resilience and Consistency

A busy market brings opportunity, but not all opportunity is equal. With a track record of a decade, strong market relationships and both strategies sourcing transactions, we benefit from a consistently broad and diverse pipeline each week. This breadth allows us to filter aggressively - focusing on counterparties with robust balance sheets, loan books that meet our eligibility and seasoning standards, and transactions with structural features that are designed to preserve capital through stress. This filtering is critical as capital continues to flow into the market. It ensures we are deploying into assets where the return not only meets our target but is structured to be sustainable across a range of market environments.

While recent market conditions have been relatively benign, a range of fundamental shifts are underway in the economy that may not immediately translate into widespread asset stress but can create volatility as sentiment adjusts. Periods of market dislocation are often driven more by sentiment and liquidity than by deterioration in the underlying assets. Having an aligned and stable investor base allows us to lean into those opportunities rather than pull back. Over nearly 10 years, the Fund has navigated liquidity shocks, credit repricing, and central bank tightening without departing from its mandate - consistently delivering capital preservation and a high level of income for investors. We do not rely on mark-to-market gains or opportunistic timing - results reflect repeatable credit work and disciplined structure. That consistency remains our advantage in a competitive market.

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The Fund delivered +0.74% in July, 9.37% over 12 months and 9.31% annualised over three years continuing to deliver over 5% net return above the RBA cash rate.

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Capital In, Spreads In

Spreads in the public ABS market have now retraced much of the widening seen through late 2023, reflecting what is, by some measures, at or near record levels of capital inflows into the sector in history. The volume of money seeking deployment has supported strong issuance, but it has also eroded some of the spread premium that should accompany private transactions. In this environment, protecting that premium, rather than diluting it for the sake of volume is key to sustaining the Fund’s risk-adjusted return profile.

For managers willing to extend risk or compromise on structure, there is no shortage of transactions to deploy into. Our focus remains on maintaining the premium available in well-structured private transactions over comparable public issuance, even if that means exercising patience where pricing no longer compensates adequately for risk.

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Balancing Selectivity with Deployment

Selectivity has become a common talking point across the sector, but genuine selectivity is not simply about declining transactions, it is about maintaining a consistent risk/return target and only deploying where those criteria are met. While temporary elevated cash holdings can be a natural feature of this asset class – particularly in preparation for large, well-structured transactions – extended periods of high cash may also indicate a lack of deal flow or an unwillingness to participate at prevailing market levels. With a track record approaching a decade, a strong reputation in the market, and deep relationships built across both strategies, we benefit from a consistently broad and diverse pipeline of opportunities each week. This allows us to remain fully engaged in the market, continually assessing opportunities, and deploying into transactions that offer quality counterparties and structural protections commensurate with the Fund’s return target.

In assessing opportunities, we believe it is important for investors to consider not just the return level offered, but the mechanics of how that return is generated and maintained over time. With the RBA cash rate having moved lower in recent months, funds offering a fixed absolute return now face a materially different environment. As benchmark rates fall, sustaining a higher fixed rate of return without a margin to a floating benchmark such as BBSW becomes progressively harder without either extending duration, increasing credit risk, or compromising on structure. Understanding this interaction between market rates, funding costs, and credit risk is central to managing credit portfolios through rate cycles and preserving risk-adjusted returns.

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Consistent Outcomes Through a Disciplined Process

The Fund’s track record continues to reflect a disciplined investment process rather than market timing or opportunistic positioning. Over nearly 10 years, we have navigated shifting economic conditions, liquidity shocks, and changes in market structure without departing from our core mandate. That consistency remains our competitive advantage in an increasingly crowded market.

The Fund delivered +0.70% in June, 9.40% over 12 months and 9.30% annualised over three years continuing to deliver over 5% net return above the RBA cash rate.

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Staying Disciplined in a Distracted Market

Despite persistently elevated global interest rates, geopolitical instability and signs of broader economic fatigue, listed equity markets continue to post gains, driven more by momentum than fundamentals. In that context, many investors are asking not only what to own, but why.

We remain of the view that the best defense against uncertainty is not a market view but a clear and repeatable investment process. Our approach does not seek to predict economic turning points or short-term price movements. Instead, we focus on identifying assets that can withstand a wide range of market and economic scenarios, including those less favourable than today.

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Credit’s Role in a Portfolio

For many investors, credit provides a stable, income generating foundation to portfolios otherwise exposed to asset price volatility. In that context, the role of credit is not to shoot the lights out but to deliver capital stability and a high level of income. In our view, the best credit strategies are defined by their downside management. This means investing in assets where the return of capital is highly likely, where the underlying security can be relied upon in an enforcement scenario, and where asset selection is supported by detailed loan-level analytics, not assumptions or extrapolated modelling.

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Holding the Line on Credit Standards

Importantly, while yields across the market may look similar, the risk beneath them can vary significantly. We continue to observe exposures to thinly capitalised lenders, subordinated debt, or structurally weaker loan books - risk factors that may not be readily apparent without deep credit expertise. While some managers provide extensive data, the challenge lies in interpretation. In credit, transparency alone is not enough: understanding how risk is originated, structured and priced requires both access and experience. Headline terms like “first ranking security” or “look through LVR” can describe very different risk profiles depending on what sits beneath them.

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Discipline is the Differentiator

Our investment team continues to take a cautious and methodical approach to deployment. That includes full visibility into the performance of every underlying loan pool and the application of a rigorous credit and structuring lens before any capital is deployed. Where a transaction or counterparty does not meet our standards, it doesn’t progress.

The result is a portfolio that is more conservatively positioned than many of our peers, but also more resilient. Our 9+ year track record reflects that consistency. Through a period that has included COVID lockdowns, liquidity shocks, aggressive central bank tightening, and sharp repricing of risk across asset classes, the Fund has continued to deliver monthly income with capital stability. We do not rely on mark-to-market gains, asset revaluations or directional market calls to support return. The outcome for investors has been one of steady income and reliable preservation of capital.

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#1 Fixed Interest Fund in Australia FY25

We were pleased to see the Fund recognised by Livewire Markets as the top-performing fixed interest fund in Australia for FY25. While league tables will always fluctuate, this acknowledgement is consistent with our long-term focus on doing the fundamentals well and doing them consistently. That consistency is grounded in discipline - in how we assess risk, structure transactions, and allocate capital.

The Fund delivered +0.67% in May, 9.47% over 12 months and 9.24% annualised over three years continuing to deliver over 5% net return above the RBA cash rate.

Comparisons in Credit

Credit continues to attract significant investor interest, and with that comes a growing number of new funds and strategies seeking capital. Many of these advertise high yields and strong return profiles, often with terminology that suggests robust downside protection — such as “first ranking security,” “look-through LVRs,” or “first loss capital.” While these features can form part of a sound structure, they are not guarantees of quality in and of themselves. The technical detail matters — and so does the experience of the team assessing it. In credit, headline terms often obscure material differences in underlying risk. Without full access to the loan level data, transaction documentation, and enforcement mechanisms, it is exceptionally difficult to compare funds on a like-for-like basis. The same language can describe entirely different risk profiles.

Risk and Return

The Manning Monthly Income Fund has now delivered consistent monthly income for nearly a decade — with no negative monthly returns from credit losses. That track record reflects a clear and consistent investment philosophy: preserve capital first and pursue yield only where it is backed by robust asset-backed security and structural protections. We continue to see peers seek higher yields by moving up the risk curve — including concentrated exposures to subordinated debt, thinly capitalised counterparties, or more cyclical lending strategies. While these approaches may produce appealing near term returns, they can expose investors to elevated downside risk, particularly in a tightening economic environment. Our approach remains grounded in delivering resilient, repeatable returns, backed by institutional quality credit work, full transparency into the underlying assets, strong governance over every transaction and deliberate avoidance of complexity that can obscure risk.

Cash Drag and Deployment Timing

This month’s return of 0.67% was modestly softer than recent periods. This reflects a higher than usual average cash holding of approximately 13% during the month, as the Fund positioned for the expected settlement of several large transactions and lender drawdowns.

Such temporary cash balances are an inherent and prudent feature of this asset class. Unlike listed markets, deployment timelines are not always linear — and we will never compromise on asset quality or structure to maintain short term consistency.  We expect this capital to be fully deployed across June.

As credit continues to evolve as an asset class, we believe the importance of experience, structure, and transparency will only increase. The Fund remains highly selective in its deployment and operates in a segment of the market where capacity is inherently limited by the quality and scale of opportunities that meet our criteria, as such, we remain disciplined about how and where we deploy capital.

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Josh Manning, Portfolio Manager and Founder presents the Q1 2025 market update for Manning Asset Management.