December 2022 – Market Commentary

The Fund delivered +0.72% in December, 7.15% over 12 months and 6.40% annualised since inception.

There are several Fund features that investors like to discuss, namely the significant number of underlying loans within the portfolio (circa 9,500+) and diversification that this achieves, the short-dated or shorter-term nature of those loans and the contractual nature of loan repayments, which has delivered consistent investor returns. Further to this, investors have recently shown increased interest in the Funds’ Sharpe Ratio.

A Sharpe Ratio is a quantitative measure of a Fund’s risk-adjusted returns. It calculates this by determining the average monthly return an investment has achieved over a period, in our case the prior 3 years. It then deducts the so-called ‘risk free rate’ being the RBA cash rate recognising that for a rate of return to be attractive, it must exceed what an investor can achieve in near zero risk investment. The Sharpe ratio then assesses how stable or volatile those monthly returns are and finally divides the average monthly returns less the risk free rate by this number. In summary, for a Fund to achieve a high Sharpe ratio it must firstly, deliver an average rate of return well above the risk free rate, and ensure that it consistently does so. The Sharpe ratio penalises a Fund that can only deliver one and not the other making it a very useful data point for investors seeking an attractive rate of return that is consistently delivered.

The Manning Monthly Income Fund’s Sharpe ratio is 23.36.

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