The Level 18 Fund increased by +3.0 per cent net of fees for the month.

Commentary

The Level 18 Fund increased by +3.0 per cent net of fees for the month. 

During the month the S&P/ASX Small Ordinaries Accumulation Index increased by +4.6 per cent and the All Ordinaries Accumulation Index increased by +4.4 per cent.

The Level 18 Fund continued to perform well on a rolling 12 month basis.  At January 31, 2025 the Fund has returned +24.1 per cent net compared to the All Ordinaries Accumulation Index at +15.1 per cent and the S&P/ASX Small Ordinaries Accumulation Index at +12.3 per cent.  Since inception (2012), the Level 18 Fund has delivered a +12.9 per cent net return per annum. 

January delivered a recovery in global equity markets following a sell-off in December.  US headlines continued to set the tone for markets, with the inauguration of Donald Trump as the new President of the US, the start of the US quarterly reporting season and the decision by the Federal reserve to pause interest rate cuts.

News regarding the potential for significant new tariffs in Mexico, Canada and China dragged on performance and contributed share price volatility during the period.  In addition, an announcement from Chinese startup, Deep Seek, regarding the launch of a new low-cost AI model delivered a sell-off within the technology sector. 

The major US indexes posted gains for the month.  Dow Jones Industrial Average and the S&P 500 gained +4.7 per cent and +2.7 per cent respectively.  Nasdaq increased by +1.6% in the period. 

The US fourth quarter reporting season to date has delivered mixed results versus market expectations.  Positive results in the Communication Services & IT sector have partially offset negative results in the industrial sector. 

The 1H FY25 reporting season is scheduled to start in Australia in Feburary.  This period provides us with the opportunity to meet with management teams, to update our investment views and to identify new investment opportunities for the Fund.  Our normal practice ahead of the reporting season is to build cash levels to allow for new portfolio investments opportunities.

In Australia the market traded to fresh highs in January.  Financials and Materials were the strongest performers.  The breath of the January rally was positive with both the large cap and small cap sectors delivering similar results.  Following a lower-than-expected December quarter CPI result, expectations for an RBA rate cut in February have now increased.  This is consistent with our expectation for a quarter three FY25 RBA rate cut. 

During the month Level 18 Fund holding, Dropsuite (DSE) entered a Scheme Implementation Deed with NinjoOne under which NinjaOne has agreed to acquire 100% of the company in an all-cash offer of $5.90 per share.  The bid price represents a 34.1 percent premium to Dropsuite’s previous close of $4.40 a share.  The transaction is an excellent result for shareholders. 

Our bullish outlook for the Australian market in the next 12 to 18 months is unchanged.  Recession fears have now receded, corporate earnings are forecast to grow, interest rates are set to moderate and the narrow rally we have seen in 2024 is set to broaden in 2025. 

We continue to see good investment opportunities within the Australian market, particularly outside the large top-100 names.  From a sector perspective, mid to small cap financials, software and USD earners look attractive to us.  Traditionally, the Level 18 Fund’s outperformance has been primarily driven by investments in the mid to small cap sectors and we expect that to continue in the future.     

Positive contributors to the Fund in January include investment bond and annuity product provider, Generation Development Group (GDG) post the release of its December quarter update, banking, superannuation & advice services group, AMP (AMP) and wealth management digital platform group, Praemium (PPS).  Other contributors include radiopharmaceutical product and equipment manufacturer Cyclopharm (CYC), Audio-visual & electrical contractor SKS Technologies (SKS) and investment management group Pinnacle Investment Management (PNI).

Payments and finance provider Zip Co (ZIP), data centre service provider Macquarie Technology Group (MAQ), apparel store retail group Universal Store Holdings (UNI) and debtor receivables platform manager Credit Clear (CCR) 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.