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June 2026 Newsletter
The Level 18 Fund increased by +4.0 per cent net of fees for the month.
Commentary
The Level 18 Fund increased by +4.0 per cent net of fees for the month.
For the year to June 30, 2026, The Level 18 Fund increased by +13.8 per cent after fees compared to the All-Ordinaries Accumulation Index at +5.7 per cent and the S&P/ASX Small Ordinaries Accumulation Index at +8.1 per cent respectively.
Importantly, the Fund has continued to outperform the market. Since inception (2012), the Level 18 Fund has delivered a +12.6 per cent net return per annum versus the S&P/ASX Small Ordinaries Accumulation Index at +6.6 per cent the All Ordinaries Accumulation Index at +9.7 per cent respectively.
June was a negative month for most major equity markets globally. The initial de-escalation of the US-Iran conflict and the associated decline in energy prices delivered increased investor optimism at the beginning of the month. However, ongoing tension in the Middle East and persistent US inflation lead the market lower towards the end of the month. A strong US Labor market report, combined with elevated inflation, led investors to scale back expectations of interest rate cuts this year. Following a strong performance over the past year, the semiconductor (chip) sector was the worst‑performing segment of the US market during the month.
The Australian market in contrast delivered a mixed performance in June. The S&P/ASX Small Ordinaries Accumulation Index was down by -2.0 per cent and the All Ordinaries Accumulation Index increased by +0.4 per cent in the month respectively. The gold price has now fallen by more than 25% from its high in January this year. As a result, gold exposed small cap equities led the decline in the small cap index. During June 2026, small cap Resources were down -13.4 per cent versus small cap Industrials at + 3.6 per cent.
Locally, returns were muted at the headline level but with wide dispersion beneath the surface. Healthcare and Staples were the best performers, both up +12.5 per cent in the month. Energy was the worst sector, down -9.0 per cent.
Several portfolio holdings raised both capital and earnings expectations during June. Southern Cross Electrical (SXE) undertook a $150M capital raise. Associated with the transaction, the company announced additional contract wins of more than $150M, a lift in FY26 earnings guidance and forecast EBITDA growth guidance of more than +30 per cent in FY27. The new capital was placed at $4.00 a share vs the June 30 price of $4.86.
Megaport (MP1) also successfully completed a capital raising associated with several new contract wins. The company announced new contracts valued at $458.9M and a capital raise of $827.3M. The new shares were issued at $14.30 versus the June 30 share price of $21.58.
SRG Global also performed well in June following a significant lift to earnings guidance in FY26 and additional contract wins. Specifically, the company announced that it secured $1.85B of contracts with blue-chip clients across a diverse range of sectors. In addition, the company provided FY27 EBITDA guidance of $190M to $200M, implying growth of at least +13 per cent vs the prior year.
On the policy front, in June the Reserve Bank of Australia elected to keep the cash rate on hold at 4.35 per cent. The decision to hold follows three increases earlier this year. Given inflation remained elevated at 3.6 per cent in May, the RBA maintained that rate hikes were possible in the future. The Board reiterated that it remains focused on returning inflation to the target range while assessing the associated data and risks.
The Centennial Level 18 Fund continues to actively manage the portfolio. During the month several new exposures were added to the portfolio including Regal Partners (RPL), Goodman Group (GMG), Pro Medicus (PME) and Flight Centre (FLT).
The Fund's outperformance in the month was driven by stock-specific exposures in digital infrastructure, electrification, engineering and construction. An underweight exposure to resources and capital goods also contributed to the Fund’s outperformance in the month.
Positive contributors to the Fund’s performance in June include healthcare imaging and radiology software business Pro Medicus (PME), payments and finance provider Zip Co (ZIP), construction and maintenance group GenusPlus (GNP) and data-centre interconnection provider Megaport (MP1).
Travel group Flight Centre (FLT), telecommunication and internet service provider Superloop (SLC) and data centre service provider Macquarie Technology Group (MAQ) made negative contributions to performance in the month.
Level 18 Fund closing on August 31, 2026 at $300M of FUM
Investors will be aware that we believe limiting the size of the Centennial Level 18 Fund optimises liquidity and contributes to long-term outperformance. As a result, once FUM reaches $300M, we plan to close the Fund to additional investments and allow it to grow organically with performance. With Funds Under Management (FUM) of approximately $270M, we expect to hit our $300M target by August 31, 2026.
Please contact Michael Carmody (mcarmody@centennialfunds.com.au or +61 414 952 985) if you would like to invest in the Fund prior to it reaching capacity.
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.