Generate Fund Performance - February 2024

Returns to the 29th of February 2024 

(after fees* and before tax) 

Generate KiwiSaver Funds:

Generate Managed Funds:

Except for the $3 per member per month administration expense that is charged to KiwiSaver members.

** The Generate KiwiSaver Scheme funds opened on 16 April 2013. The Generate Focused Growth Trust opened on 1 November 2019.

***Following the launch of our new funds, the Conservative Fund has been renamed as the Moderate Fund and the Focused Growth Trust has been renamed as the Focused Growth Managed Fund.

^ these funds were established on 16 May 2022

^^ these funds were established on 3 July 2023

Past performance is not necessarily an indicator of future performance. Generate’s fund updates can be found here.

International Equities

Global equity markets had a strong month in February, gaining 4.3% in USD terms, and 5.3% in NZD terms. A robust earnings season drove most of this strength with three-quarters of large US companies beating their earnings targets for the 4th quarter of 2023. 

There were two standout performers during the month, with each building on their success from 2023. Semiconductor darling Nvidia rose 29% in February after earnings exceeded the market’s high expectations. Wall Street’s estimates for Nvidia’s fiscal year 2025 earnings have now grown 4.1x since March last year, raising the stock price by 3.6x over the same time. Meta Platforms (who owns Facebook, Instagram, and WhatsApp) also performed well, rising 26% in February to deliver a 185% gain over the past twelve months.

Several other holdings also performed well in February. Our investments in luxury car manufacturer Mercedes Benz (+17.9%), construction materials business CRH
(+17.5%) and drug-maker Eli Lilly (+16.9%) all enjoyed strong gains during the month.

Western Alliance (a regional bank based in Phoenix, Arizona) was our worst performer in February, falling -9.2% over the month.  Regional banks were out of favour after New York Community Bank reported poor 4th quarter earnings and Western Alliance was caught up in the negative sentiment. We believe fears about financial contagion are unwarranted, as they were last year, and we continue to believe Western Alliance will build on its long-held track record of delivering value for shareholders.

New Zealand & Australian equities

Amidst a busy reporting season, the New Zealand broad market declined -1.1% as cyclical companies provided relatively weak outlooks. The comparable Australian market fared better, gaining 2.7%.

Our funds largely dodged the worst performers in the market: Fletcher Building, Ryman Healthcare and Kathmandu, which declined -9.3%, -18.6% and -25.7%, respectively. Fletcher
Building shocked the market with multiple disclosures of further impairment charges within the business, earnings downgrades, and the resignation of the Chief Executive and Chairman of the company. This left the market questioning the near-term future of the business as it grapples with major construction losses and litigious claims against its Iplex pipes business in Australia. 

Ryman Healthcare’s shares fell sharply on news that it expects full-year earnings to come in 13% lower than the company had previously guided. The retirement village provider forecast its underlying profit to be between $265 million and $285m in the 12 months ending March, compared with its prior guidance of between $300m and $330m. 

Ahead of releasing their interim results in March, Kathmandu announced a disappointing trading update, which revealed that sales are slowing down across all brands. Pleasingly our funds do not own Fletcher Building or Kathmandu, and only have a small holding in Ryman Healthcare.

While much of the funds' outperformance relative to the benchmark came from avoiding poor performing stocks, two standouts were the investments in Australian banks: Westpac, and National Australia Bank (NAB). Both Westpac and NAB reported their 1Q24 results in February, which demonstrated solid trading updates. Net interest margins, a key measure of bank profitability, were ahead of expectations, while bad and doubtful debts were better than feared. In Westpac’s case, cost control was tracking well, and NAB announced a relatively smooth CEO transition after Ross McEwan had guided the bank back to strength after a difficult period following the Australian Royal Commission.

Lastly, it’s worth pointing out that while Ryman provided a weak trading update, their key large cap peer Summerset demonstrated almost entirely the opposite within their FY23 result. The company reported strong underlying earnings driven by robust resale and new sale gains, albeit partly offset by higher costs. Summerset’s result were underpinned by all-time high resale margins, which was particularly impressive against a weak domestic housing market. Summerset’s share price gained 0.6% over the month.

Top Holdings as of the 29th of February 2024

Generate total Funds Under Management (FUM) as of 29th of February 2024: $5,120,754,427.94