February 2023 – Market Commentary

The Fund delivered +0.67 in February (noting February being a shorter month and therefore returns were marginally softer), 7.76% over 12 months and 6.46% annualised since inception.

We are pleased to report another strong return, continuing to outperform the RBA cash rate by 5.94% (12 months). Investors will note the higher RBA cash rate, which lifts the Fund’s return objective and, importantly, the return paid to the Fund on underlying investments. We see this inflation-fighting feature (i.e. returns post the impact of inflation are of the utmost importance to preserve the real value of capital) as a key benefit of the Fund and one naturally afforded to the Fund given the variable rate investments that we make.

Despite the Fund’s higher expected returns, our approach to risk management remains unchanged. We acknowledge the potential for the local economy to remain robust and therefore deliver further interest rate increases or to substantially slow, both of which puts pressure on investment portfolios. With that outlook, the team continues to insist on strong structural protections to protect our capital, maximising the benefits of diversification and remaining ‘short-dated’ or investing in shorter-term opportunities which over our history has proven to offer greater portfolio flexibility and lower risk profiles. We remain very active in managing the portfolios, mainly as credit spreads are wider than 12 months ago. Given the short dated nature of the portfolio, we continue to negotiate higher returns on equivalent assets to provide ongoing attractive return opportunities for the Fund.

We also note commentary in the market regarding some credit funds charging upfront fees (in addition to their ongoing management fees) on underlying investments and not passing these on to investors. Since our inception in 2015, all fees and returns paid by underlying investments are delivered to the Fund and therefore, investors.

The Manning team continues to be a substantial investor in the Fund alongside our clients. We are committed to continuing our seven year track record of delivering an attractive inflation adjusted return to our investors with strong capital stability, and very carefully investing the capital in select opportunities which we believe will perform through the economic cycle.

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