February 2024 - Market Commentary

The Fund delivered +0.70% in February, 9.51% over 12 months and 6.84% annualised since inception (April 2016), continuing to deliver over 5% net return above the RBA cash rate.

The Fund carried a higher than normal cash holding last month as we declined to participate in a transaction towards the end of the due diligence process. We spent many months structuring this transaction only to find out late stage that one of the risk mitigants we sought was not granted, therefore we made the difficult decision to withdraw. However, we believe this is in investors long term best interests and consistent with our investment philosophy: capital preservation is the first priority of the Fund.

As interest in fixed income investments and private credit continues to surge, the market is witnessing a parallel growth in the number of new fund managers looking to ‘make hay while the sun is shining’. This development has led to a common question from both potential and existing investors: what distinguishes Manning Asset Management in this increasingly competitive landscape?

This month we wanted to touch on three of these key differentiators.

1. 8 year track record of delivering a strong and consistent income stream to investors

For the past eight years, the Manning Monthly Income Fund has consistently achieved its target return of RBA cash rate +5%, net of fees. Year after year, this performance demonstrates the Fund’s ability to deliver strong and consistent returns in the form of a monthly cash income stream, while maintaining an acute focus on capital preservation. We are pleased to be entering our ninth year of the strategy and endeavour to continue the Fund’s track record of never having a negative monthly return from credit losses.

1. Skin in the game and alignment of incentives

The Manning team is not just a Fund manager but also a substantial investor in the Fund, investing alongside our clients on the same terms. This shared risk aligns our commitment to capital stability and our careful selection of investment opportunities that we believe will perform throughout the economic cycle. We also ensure that all fees, interest, and other related benefits are passed directly to investors. We reject the practice of retaining establishment or upfront fees or other such payments made when investing in a new transaction. This approach removes any potential conflict of interest, allowing us to focus solely on safeguarding investor interests and investing in transactions that best fit the fund’s risk-return profile.

1. Diversification

A key component of our investment strategy is diversification. We ensure that investor capital is not overly concentrated in any one sector or individual loan. The Fund invests in a significant number of underlying loans (19,323?as at 29 February 2024), thereby reducing the risk of unforeseen economic events having a material impact on the Fund. The Fund’s largest single asset currently accounts for 1.72% of the Fund. This approach mitigates concentration risk and ensures that issues with individual loans do not negatively impact investor outcomes.

As a testament to delivering on our stated investment objective, 90% of our investors from 5 years ago remain in the Funds today, and circa 93% of all investors remain invested today.