News and Insights

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.

The Fund delivered +1.10% in October, 14.14% over 12 months and 14.72% annualised since inception, continuing to deliver over 10% net return above the RBA cash rate.

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Fund Profile: How This Strategy Differs from the Manning Monthly Income Fund

We’ve had a few recent conversations that highlighted it may be useful to briefly restate what the Credit Opportunities Fund is – and isn’t – particularly in contrast to the Manning Monthly Income Fund (MMIF).

The Monthly Income Fund is built around predictable, scalable and repeatable financing arrangements. That naturally lends itself to larger transactions, highly diversified loan pools and a stable monthly cashflow profile. Its role is to deliver consistency and a very tight band of outcome variability.

By contrast, the Credit Opportunities Fund is deliberately positioned to sit further up the complexity spectrum. It targets transactions that are not suitable for MMIF due to a variety of factors, some of which include:

• Less scalable (finite size or one off opportunities)
• More idiosyncratic or heavily structured
• Not naturally monthly income paying (for example, quarterly or irregular payment profiles)
• Priced to reflect higher complexity and risk, consistent with the Fund’s higher return target.

As a result, this Fund is inherently more opportunistic. It is designed to participate in specialist, harder to access transactions where structure, control and pricing are attractive.

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Market Conditions

We continue to see substantial capital flowing into credit – from bank balance sheets, offshore investors and an expanding universe of domestic credit funds. Many of these strategies fund a single originator or are themselves both originator and manager. At the same time, there is increasing scrutiny on asset valuations and how returns have been generated in some parts of the market. To borrow Warren Buffett’s line, "only when the tide goes out do you discover who's been swimming naked". In that environment, we see clear value in:

• Having deep securitisation and structured finance experience across multiple cycles (over 150 years cumulative within the investment team); and
• Maintaining a mandate that can be genuinely opportunistic when others are forced to de-risk, sell assets or restructure funding arrangements.

The Credit Opportunities Fund is designed to take advantage of those moments - not by chasing distress for its own sake, but by selectively backing strong counterparties and asset pools where structure, control and pricing are compelling and where complexity creates a barrier to entry for more standardised strategies.

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Pipeline and Capacity

Our current pipeline reflects this opportunity set. While still at an early stage and subject to full due diligence, we are engaged in discussions with several lenders and originators that, in aggregate, could represent in excess of $100 million of potential new facilities over the next 6–12 months. There is no guarantee these transactions will proceed or ultimately be suitable for the Fund, but they illustrate the breadth of opportunities we are seeing across the specialist and non-commoditised parts of the market.

If a subset of these opportunities progress on terms that meet our risk and structuring requirements, we can see a credible pathway to selectively reopening the Fund to additional capacity during 2026. Any such decision would be communicated well in advance and would continue to prioritise existing supporters of both this strategy and the Manning Monthly Income Fund.

For now, the Fund remains near fully invested with very low cash levels and is closed to new and existing investors. Managing inflows and capacity carefully remains central to maintaining the Fund’s return profile and its ability to act nimbly when attractive, higher complexity opportunities arise.

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 +0.67% in September, 14.36% over 12 months and 14.74% annualised since inception, continuing to deliver over 10% net return above the RBA cash rate.

Income Recognition and Distribution Timing

September saw a significant increase in interest income across the portfolio, largely reflecting the timing of interest payments from several transactions. A major contributor was a quarterly paying asset that distributed its full interest for the period, along with the first payment from a new investment funded in July.

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Where transactions do not pay interest monthly, the Fund accrues interest into the unit price until the cash is received. Once received, that income is distributed to investors in the following month’s distribution, and the accrued component of the unit price correspondingly falls. As a fully distributing income trust, this approach ensures investors always receive the full net amount of income generated. Importantly, this is standard accrual accounting - it simply reflects the timing of cash flows - and is entirely distinct from capitalised interest structures, such as those used in construction or development finance, where interest compounds into the loan balance rather than being realised and distributed to investors.

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Monthly Performance Drivers

Performance during September was modestly softer, at +0.67%, due to a one-off adjustment relating to the clean-up of a small tail of legacy whole loans purchased several years ago. This accounted for approximately 40 basis points of performance impact and represents routine portfolio housekeeping rather than any change to the underlying income profile.

Offsetting this, one existing lender drew on their facility during the month, reflecting the continued depth of portfolio activity and the strong origination momentum across the Fund’s core counterparties.

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Market Observations

Broader credit markets have remained stable through September, with spreads largely range bound and issuance activity healthy across both public and private segments. While public securitisation spreads remain tight, we continue to observe selective repricing in private transactions as lenders seek more flexible funding structures. This divergence between flow driven public markets and negotiated private deals continues to favour the Fund’s mandate, where structural depth and customisation drive returns rather than scale or liquidity.

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Portfolio Positioning

The Fund remains near fully invested, with very low cash levels enhancing portfolio efficiency. We continue to manage inflows carefully to preserve this position and maintain flexibility to fund existing lender commitments. The current environment continues to reward credit discipline and strong counterparty relationships, both of which remain central to how the Fund is managed.

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The Fund remains closed to new and existing investors.

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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