The Fund delivered +0.72% in November, 9.35% over 12 months and 6.75% annualised since inception (April 2016), continuing to deliver over 5% net return above the RBA cash rate.

In December 2022, as we combed through the economic forecast of the major banks and research houses, we saw considerable consensus around the RBA cash rate peaking at 3.1% to 3.85% by March or April 2023, inflation falling to circa 3% by December 2023 and Australian residential property falling some 15%-20% peak to trough. With the benefit of time, we now know rates didn’t peak in early 2023, property didn’t fall as expected, and inflation didn’t subside despite the prolific use of monetary policy. Looking at 2024, reading these same reports, and undertaking our analysis, what actionable insights can we draw from these prior forecasts that haven’t proven to be particularly reliable?

Firstly, maintaining our focus on investing in shorter-dated opportunities, that is, positions where we can either renew or where capital is returned every 12-24 months. The Fund today (as at 30 November 2023) has a weighted average life of 0.57 years, which means 50% of the capital could, based on contractual terms, be returned within 6.80 months, enabling us to change how we invest as the outlook changes. Secondly, diversification or, more importantly, the lack of any large concentration in any sector or individual loan will reduce the risk of certain unforeseen economic events having a material impact on the Fund. Currently, the Fund’s largest single asset is 0.99% of the Fund. We believe further our focus on such elements can provide a strong foundation to navigate 2024 and continue delivering strong returns to our investors.

As investors may have observed, monthly returns will vary month to month, largely due to activity levels (recycling money from one maturing investment into a new investment), which results in the Fund holding higher than targeted cash levels throughout the month, detracting from returns in the short term. While we acknowledge this short-term impact, the imperatives around following our investment process and staying true to label in targeting assets that will perform through the economic cycle is of far greater significance. This rigour in our approach will mean we may say no to transactions in the late stages of due diligence, which causes higher levels of cash held for such investments to be deployed later. We believe making the right investment decisions rather than minimising cash held is of far greater significance in maximising returns over the long term

On behalf of the Manning Team, we thank all our clients for their ongoing support and wish everyone an enjoyable break over the festive season.