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April 2026 Newsletter
The Level 18 Fund increased by +1.9 per cent net of fees for the month.
Commentary
The Level 18 Fund increased by +1.9 per cent net of fees for the month. For the 12 months to April 30, 2026, the Fund increased by +12.2 per cent.
In the US, the S&P 500 and the Nasdaq Composite Index finished the month up +10.4 per cent and +15.3 per cent respectively. The Russell 2000 (US small caps) was up +12.2 per cent.
April delivered a market recovery from the sell-off that took place in March. The de-escalation of the US-Iran conflict and optimism regarding a potential peace deal drove the market rally. The unresolved disruption to the oil supply chain through the Strait of Hormuz has largely been discounted by US investors as markets reached pre-war levels during the month. Contributing to the strength of the US market were better than expected results from mega-caps and AI-expenditure beneficiaries. The more energy and interest rate exposed Australian market continues to trade at a discount to its pre-war level.
The impact of the war in Iran and the risks associated with higher energy costs, inflation and consumer demand have already started to impact the outlook for local company earnings. During the month, profit downgrades were delivered by Cochlear (COH), Cleanaway Waste Management (CWY), Qantas Airways (QAN), Worley (WOR) and Qube Holdings (QUB). With elevated energy prices and corporate earnings risk likely to remain in the medium-term, the Centennial Level 18 Fund portfolio is positioned to protect capital and optimise performance.
The Fund continues to avoid interest rate sensitive (property trusts, debt providers & banks) and consumer discretionary (retail) sectors. We continue to see value in companies exposed to capex driven earnings growth (mining services, engineering contractors and data centres). Importantly, two small cap positions within the portfolio delivered profit upgrades during the month. Codan (CDA) and Etherstack (ESK) both provided earnings updates that were ahead of consensus forecasts.
In Australia, April was a positive month for both large and small caps. The S&P/ASX Small Ordinaries Accumulation Index and the All-Ordinaries Accumulation Index increased by +3.3 per cent and +2.4 per cent in the month respectively. In contrast to the previous month, Small cap resources outperformed in April with the sector up +5.1 per cent for the month versus small cap industrials at +2.5 per cent.
Locally, the early strong relief rally was followed by a month-end sell-off. Ahead of the Federal Budget and the May RBA decision, investors lowered equity market exposure. The materials sector was the key driver of the gains in the month. The Australian market’s higher exposure to cyclicals was the primary reason the local market underperformed versus the technology/growth dominated US market in the month.
The Consumer Price Index (inflation) for the March quarter 2026 was released in April. The RBA’s preferred measure of annual underlying inflation (trimmed mean) was 3.5 per cent, above the target range of 2 to 3 per cent. Post the month close, the RBA lifted interest rates for the third time by 25 bps to 4.35 per cent.
Referring to the rate increase, the RBA Governor Michele Bullock said, “this gives the board space to see how the conflict plays out and the response of Australian households and businesses to the shock. The board remains focussed on returning inflation to target.”
As widely expected, the US Fed kept rates on hold for a third consecutive meeting and for now is looking through elevated inflation driven by higher energy prices.
Positive contributors to the Fund’s performance in April include civil, resource and infrastructure services engineering group NRW Holdings (NWH), electrical, communications & maintenance provider Southern Cross Electrical Engineering (SXE), metal detection and communications technology business Codan (CDA) and electrical distribution and engineering group IPD Group (IPG).
Property construction, fitout and refurbishment company Shape Australia (SHA), branded milk group A2 Milk Company (A2M) and integrated platform, technology and data wealth service provider HUB24 (HUB) made negative contributions to performance in the month.
The Level 18 Fund Information Memorandum (IM) and application form are available on the Centennial Asset Management website. Please note existing unit holders are only required to compete a one-page additional application form. The following link (https://www.centennialfunds.com.au/) provides access to the IM and application documents.
Thank you as always for your continued support and please contact Michael Carmody (mcarmody@centennialfunds.com.au or +61 2 8071-9215) if you would like any further details.
The Centennial Team
Monthly Net Returns Since Inception
About Centennial Asset Management
Centennial Asset Management is an independent Australian asset management business, and the manager of the Level 18 Fund, an index unaware fund, with asset allocation flexibility and a concentration of small capitalised companies. Further information on Centennial is available on our website - www.centennialfunds.com.au
Disclaimer
Strictly confidential: This report has been prepared by Centennial Asset Management ACN 605 827 745 & AFSL No. 515887 for Wholesale Clients only as an indicative record of the performance of an investment in the Level 18 Fund. No recommendation is made or advice given in respect of any entity in which the Level 18 Fund has, is or may in the future be, invested. The contents of this report are confidential, and the client may only disclose such contents to its officers, employees or advisers on a need to know basis, or with the prior written consent of Centennial Asset Management. Centennial Asset Management does not guarantee the performance of the Level 18 Fund or the return of any investor's capital in the Level 18 Fund. This investment report contains historical information, and does not imply any indication of future performance, recommendation or advice. Past performance is not a reliable indicator of future performance. Any investment needs to be made in accordance with and after reading any relevant offer document. This material has been prepared based on information believed to be accurate at the time of publication. Assumptions and estimates may have been made which may prove not to be accurate. Centennial Asset Management accepts no responsibility to correct any such inaccuracy. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information. To the full extent permitted by law, none of Centennial Asset Management, or any related body corporate or any officer or employee of any of them makes any warranty as to the accuracy or completeness of the information in this report and disclaims all liability that may arise due to any information contained in this newsletter being inaccurate, unreliable or incomplete. *Prior to launch of the Level 18 Fund on 1 September 2014, Centennial Asset Management had established a separately managed account (“SMA”) and performance prior to 1 September 2014 is illustrated on a gross pro-forma basis, that invests with the same mandate as the Level 18 Fund and is included in the tables above, for comparative purposes only. The returns assume reinvestment of distributions.