Protecting Capital.
Powering Wealth.

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.

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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.

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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.

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The Fund delivered +1.20% in December, 13.83% over 12 months and 14.70% annualised since inception, continuing to deliver over 10% net return above the RBA cash rate.

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Over recent months, a common question from investors and advisers has been around timing: when the Fund may reopen and how that relates to the transaction pipeline we are working through. It is worth reiterating how capacity is created in this asset class and why visibility on the pipeline does not translate directly into deployable capital.

MCOF is designed as a high target return credit strategy, and the relationship between capital raised and capital deployed is central to outcomes. With a target of RBA Cash +10% net of fees, holding excess cash for extended periods has a direct and measurable impact on returns. For that reason, capital is raised with reference to confirmed or near-term deployment opportunities, rather than on a continuous basis.

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Execution in this market is inherently nonlinear. Facilities typically involve multiple counterparties, detailed documentation, covenant negotiation, and, in some cases, securitisation mechanics. Timelines can compress or extend as these processes evolve, particularly over the summer period.

This approach is deliberate. It reflects a preference to align capital raising with deployment, rather than reopening the Fund prematurely and carrying cash while transactions progress.

At any given time, the Fund is engaged in multiple transactions at different stages of development. Some facilities are in late stage execution, where documentation is substantially agreed and settlement timing is becoming clearer. Others are in advanced diligence, often involving complex business models and capital structures or multiparty arrangements that require extensive legal, operational and credit work before sizing and terms are finalised. We may also be engaged in earlier stage discussions where there is alignment in principle with a lender, but where capital requirements, structure or timing remain fluid.

Importantly, even once terms are agreed, the path to funding is rarely linear. Facility sizes can change, drawdown schedules can move, and in some cases, transactions do not proceed. This is not a reflection of execution risk so much as the reality of underwriting bespoke, asset-backed credit facilities where multiple counterparties, business structures and risk considerations intersect.

For this reason, we do not manage Fund capacity based solely on the indicative pipeline. Capacity is created when there is sufficient certainty around both the quantum and timing of capital deployment. Opening the Fund prematurely based on prospective transactions risks holding idle cash for extended periods, which is inconsistent with the Fund’s return objective and with our alignment as investors alongside unitholders.

As the Fund has grown, this discipline has become even more important. Facility structures evolve as lenders scale, counterparties refinance, or portfolios season. At times, capital can also be returned to the Fund unexpectedly as lenders adjust their own balance sheets. Maintaining flexibility on both the deployment and capital raising side allows us to respond to these dynamics without compromising portfolio quality or return integrity.

While this approach can result in periods when the Fund remains closed despite an active pipeline, it reflects the strategy’s underlying mechanics. Our focus remains on deploying capital only when structure, documentation and risk parameters are fully aligned, rather than optimising for predictability of inflows. Over time, this discipline has been a key contributor to the Fund’s ability to deliver consistent outcomes across cycles.

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The Manning Monthly Income Fund returned +0.66% in December 2025, 8.96% over 12 months and 9.35% over three years, continuing to deliver net returns of over 5% per annum above the RBA cash rate.

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Deployment Timing Into Year-End

As anticipated, the Fund is carrying higher cash balances as several larger transactions progress through final documentation and execution stages. In structured credit, particularly within securitised and multi-party facilities, deployment timing is driven by legal completion, counterparty readiness and warehouse funding mechanics rather than market conditions. This is especially evident around the December and January period, where execution timelines can extend despite underlying asset performance remaining unchanged.

While we continue to manage applications and deployments as tightly as possible, short term variation in monthly returns is more often a function of cash balances than credit outcomes. Importantly, this reflects discipline around structure and execution rather than a shift in risk appetite or opportunity set. We expect these transactions to fund progressively as process permits, consistent with the nature of the asset class.

Risk Dispersion Beneath The Surface

Market conditions remain supportive for issuance, but the dispersion of risk across the credit market continues to widen. Strong demand and elevated capital inflows have tightened pricing in parts of the ABS market, with covenants and structural protections increasingly bid down as competition intensifies. In this environment, headline yield alone provides an incomplete picture of risk. In our view, the more meaningful distinction is not between public and private markets, but between exposures underpinned by observable borrower cashflows and those reliant on refinancing assumptions and capitalised income. As competition increases, this distinction becomes more important. Rather than competing on price, our focus remains on a narrower segment of the market where we can partner with high quality non-bank lenders, access granular loan-level data, and negotiate structures that prioritise durability over volume. Structures that perform well in benign conditions can behave very differently once liquidity tightens or sentiment shifts, even where underlying assets appear similar on the surface.

Structure As a Source Of Resilience

Periods of market volatility are often characterised by dislocation in pricing and liquidity rather than immediate deterioration in underlying collateral. For this reason, we continue to prioritise facilities where downside is managed structurally rather than through timing or discretion. Eligibility constraints, performance triggers and amortisation mechanics are designed to operate early and automatically, reducing reliance on market conditions or our intervention.

As the Fund enters its eleventh year, this emphasis on contracted cashflows, conservative structuring and repeatable processes has remained central to targeting capital stability and a consistent level of income across different market environments. While the backdrop continues to evolve, our approach has not. The focus remains on deploying selectively where structure and risk are appropriately aligned.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

The Fund delivered +1.03% in November, 14.20% over 12 months and 14.68% annualised since inception, continuing to deliver over 10% net return above the RBA cash rate.

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As we approach the end of 2025, the Fund remains well placed, with performance continuing to reflect disciplined deployment, controlled cash levels and the strong contribution of asset-backed transactions across the portfolio. Activity from counterparties has remained consistent, and we continue to see high engagement from lenders seeking long-term, strategic funding partners.

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Structure, Discipline and Measured Deployment

2025 has been a year defined by rising competition in credit, a more discerning regulatory environment and heightened scrutiny around valuation and income recognition across the market. Against this backdrop, the Fund has maintained a clear and consistent stance: prioritise structure, control and counterparty quality over scale or speed of deployment.

A number of transactions completed throughout the year highlight this approach. Several facilities were upsized as our familiarity with issuers deepened, while others progressed through extended structuring and negotiation phases before meeting the Fund’s standards. This approach - gaining comfort, building conviction, and scaling over time - has remained central to managing risk and return in an environment where headline yields alone are not a reliable guide of underlying quality.

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Market Conditions

Stronger competition for simpler, more commoditised assets persisted through 2025, supported by record inflows into both public and private credit strategies. By contrast, the Fund’s focus on more complex, less intermediated transactions has continued to present attractive opportunities, reaffirming the value of genuine structuring capability and transparent credit processes - features that have long underpinned the Fund.

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Looking Ahead to 2026

We enter the new year with a constructive but measured outlook. The pipeline remains healthy, and we are progressing preliminary discussions and early stage due diligence on a select number of more substantial opportunities. While still in formative stages, these may create pathways for additional deployment in 2026.

Any decision to reopen the Fund will continue to be guided by transaction availability and the ability to deploy capital into opportunities that meet our risk and return requirements. At present, the Fund remains closed to new and existing investors.

The Fund delivered +0.72% in October, 9.17% 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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Preparing For Upcoming Transactions

Over the coming months we expect several large transactions to complete. In preparation, the Fund will be carrying higher cash balances so we can fund those drawdowns on schedule. In this asset class, timing is driven by documentation, multiparty negotiations and securitisation mechanics that can take months to finalise. While we aim to align applications and deployments closely, monthly returns typically move around more due to cash levels rather than any change in credit performance. Our focus remains on allocating into facilities with the structural depth we require, not on compressing timelines at the expense of quality.

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Inflation Risks and Portfolio Resilience

Recent data has reinforced what we have long believed - that inflation in Australia remains structurally stickier than in many developed markets. Core measures remain above the RBA target, while forward indicators of growth and employment are softening. This combination has renewed discussion around the risk of stagflation, slow growth coupled with persistent inflation. For credit investors, the practical consideration is how portfolios perform when rates remain higher for longer while economic momentum slows. In our view, the resilience of our Fund depends not on forecasting macro conditions but on ensuring every exposure can withstand them.

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Structural Strength Over Market Cycles

The portfolio is targeting performance across a range of rate and growth environments, with exposures typically secured against diversified, self-amortising loan pools supported by enforceable collateral, hard eligibility criteria and transparent performance data. Income is generated from cashflow, not revaluation, and structural features such as arrears triggers and early amortisation mechanisms operate to preserve capital should conditions deteriorate. These mechanics are designed to function regardless of whether inflation, growth or policy rates surprise in either direction. Periods of slower growth or policy uncertainty often expose the difference between structural and cyclical returns. For us, the emphasis remains on stability - ensuring each exposure performs on its own merit, without dependence on market momentum or yield compression.

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Consistent Process, Proven Track Record

As a team we remain fully engaged in the market with a consistently broad pipeline across both strategies each week. We deploy where the risk, structure and counterparty quality meet the Fund’s return target. Approaching 10 years, the track record reflects a repeatable process rather than mark-to-market gains or tactical calls. Through liquidity shocks, credit repricing and policy tightening, the objective has been unchanged: capital preservation and a high level of income, delivered with transparency and discipline.