Returns to the 28th of February 2023
(after fees* and before tax)
Generate KiwiSaver Funds:
5 Year (p.a.)
10 Year (p.a.)
Generate Managed Funds:
5 Year (p.a.)
10 Year (p.a.)
Since inception** (p.a)
Focused Growth Managed Fund^
Balanced Managed Fund
*Except the $3 per member per month administration expense that is charged to KiwiSaver members.
** The Generate KiwiSaver Scheme Focused Growth, Growth and Moderate funds opened on 16 April 2013. The Generate KiwiSaver Scheme Balanced, Conservative and Defensive Funds launched on 16 May 2022.
The Generate Focused Growth Managed Fund opened on 1 November 2019. The Balanced and Conservative Managed Funds opened on 16 May 2022.
^Following the launch of our new funds on 16 May 2022, the Conservative Fund was renamed as the Moderate Fund and the Focused Growth Trust was renamed as the Focused Growth Managed Fund.
Past performance is not necessarily an indicator of future performance. Generate’s fund updates can be found here.
International equities update
Global equity markets fell modestly in February after a strong start to the year in January. The MSCI World Index fell -2.4% for the month in local currency terms but rose 1.6% in NZD terms as the NZD weakened against the USD. Equity markets are currently wrestling between the prospects of stronger than expected economic growth that helps company earnings, and higher interest rates that typically lead to lower valuations. These opposing forces set the scene for more market volatility in the year ahead, which we’ve prepared for by increasing the diversification of our portfolio to reduce stock-specific risks. We have also added to some of our more defensive stocks, which don’t rely on a strong economy to perform well.
Our strongest performers during February were all driven by better-than-expected earnings results. Meta Platforms rose a further 17.4% in February in addition to its 23.8% advance in January, generating a 45% return year-to-date.
Our weakest performers during February were commodity-driven companies that fell out of the market’s favor due to falling commodity prices and better headline returns from some unprofitable “new technology” stocks. Agnico Eagle’s stock price fell -17.8% in February after reporting modest operating results that fell short of the market’s expectations. The stock was also impacted by a -6% softening in the gold price. We believe the decline in the price of gold is only temporary because a long-term demand and supply imbalance will lead to higher prices for producers over time. We are therefore holding our positions in the companies exposed to this theme.
New Zealand & Australian equities update
The NZ share market followed offshore markets with the S&P/NZX50 finishing down -0.6% for the month. Many companies released their financial results for the period ending December, making February a busy month for local investors.
Precinct Properties generated the strongest returns in the domestic part of the funds, appreciating 6% after reporting better than expected results. The high-quality office landlord started their financial year stronger than expected by pushing rents higher. Precinct avoided upgrading their dividend guidance for now, but this strong start suggests that they may be able to pay more than their current forecast of 6.7 cps.
Mercury Energy, a renewable electricity generator and retailer, also had a promising start to its financial year. The wet weather across the north island filled Lake Taupo, enabling them to generate more electricity from their hydro scheme along the Waikato River than expected - albeit at a lower price. Mercury also avoided the temptation to upgrade full year guidance, but the strong results still catalyzed a 5% rise in the company's share price over the month.
Ryman Healthcare unexpectedly announced an equity capital raise at a significant discount to its share price. Ryman will use the proceeds of the raise to pay back debt issued in the US. This transaction attracted an eyewatering $134 million prepayment penalty, which caused some commentators to question whether the company had breached a debt covenant. The large $900m raise at a significant discount, combined with the prepayment fee, caused the company's share price to tumble 19% for the month. We took this opportunity to add to our Ryman position because we believe these headwinds will be temporary. While the company’s large prepayment penalty was unwelcome, the equity raise fixes the company's balance sheet issues for the most part.
Top Holdings as of the 28th of Febuary 2023
Meta Platforms Inc
T Rowe Price Global Equity Fund
Worldwide Healthcare Trust
Nuveen ESG Large Cap Value ETF
European Opportunities Trust
iShares MSCI World Quality Dividend ESG ETF
Property & Infrastructure
Fisher & Paykel Healthcare
Kāinga Ora Bonds
Local Government Funding Agency Bonds
Westpac Term Deposits
Investore Property Bonds