Returns to the 31st of May 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 new funds in May 2022, our original Conservative Fund was 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 posted a solid month of gains in June (+2.1% in USD, +2.8% in NZD as measured by the MSCI World Index) fuelled by growing confidence in AI-related stocks. 

While these gains are encouraging – and they led to gains for many of our investments (see below) – the fact that many stocks across the market didn’t show the same strength does warrant some caution. We are monitoring these developments closely and have made some adjustments to our portfolios to reflect them. 

Semiconductor companies were the top performers in our global portfolios with Broadcom (+21.7%) being our best-performing stock whilst TSMC (+15.9%) and Nvidia (+12.7%) also delivered attractive returns. The stock prices for these companies gained over June as investors continued to raise their growth estimates for AI chip makers due to the enormous levels of AI-related investments being made by Big Tech companies. Enterprise software company ServiceNow also had a good month, gaining 20.2% in June to rebound from a weaker period in prior months. 

Our worst performer during the month was UK-based payments business Wise, which lowered its margin guidance to levels that, we believe, are extremely conservative. We continue to hold our (relatively small) investment in the company. 

New Zealand & Australian equities

June was another weak month for the local market with the S&P/NZX50 declining -1.3%. This performance was particularly weak compared to the Australian market, which rose 1% over the same period. 

New Zealand companies exposed to discretionary consumer spending continued to come under pressure, with The Warehouse Group and Kathmandu both announcing another round of earnings downgrades. We are not invested in either of these companies.  

The Australasian portfolio’s strongest performers for the month were Infratil (+7.1%), Insurance Australia Group (+7.4%), and National Australia Bank (+6.3%). Infratil’s performance was particularly impressive given the $1.15bn capital raise they successfully executed on 17-18 June. The capital raised by this issue will be used to fund growth opportunities in their infrastructure portfolio. For example, half of the $1.15bn will be deployed to a company called Canberra Data Centres, which is increasing its development pipeline and bringing forward new capacity development due to persistently strong demand for their leases. Infratil’s capital raise was well supported by the market with the share price closing 10% above the raise price of $10.15.  

Insurance Australia Group (IAG) is a relatively new addition to the portfolio and has an appealing outlook. Late in the month, IAG released an update to the market announcing a new 5-year reinsurance deal with Warren Buffett’s Berkshire Hathaway. We believe the deal will benefit IAG over the long term by reducing catastrophe claim costs and stabilising future earnings.  

Goodman Property trust (GMT) and Meridian Energy (MEL) were the portfolio’s largest detractors for the month, down -7.6% and -7% respectively. As discussed last month, MEL’s share price jumped strongly in May when they signed 20-year demand contracts with the Tiwai Point Smelter. MEL’s slide in June was likely due to investors locking in profits by selling some of their holdings after the market’s initial enthusiastic reaction. There was no substantive news from GMT to explain their decline.  

Top Holdings as of the 30th of June 2024

Generate total Funds Under Management (FUM) as of 30th of June 2024: $5,595,622,249.05

Returns to the 31st of July 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 new funds in May 2022, our original Conservative Fund was 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 equities rose in July, with the MSCI All Country Global Index up +1.5%, although the modest rise disguised some significant changes below the surface. The moves were largely triggered by softer inflation data, falling interest rates, and a spike in Donald Trump’s election chances post the failed assassination attempt (although this proved to be short-lived when Joe Biden withdrew his candidacy). The market predicted these forces would create a pro-business environment in the US, largely benefitting cyclical sectors such as Financials and Industrials. As a result, the Russell 2000 small cap index shot up more than +10% in July, far exceeding the +1.1% return of the S&P 500. Notably, the momentum and growth stocks that have powered the equity market rally year to date largely underperformed the market, with five of the “Magnificent Seven” stocks posting negative monthly returns (the exceptions being Tesla and Apple).

Generate’s global returns benefited from its diversified approach, with big gains in smaller cap holdings offsetting falls in large cap technology stocks. At the top of the returns table were two US regional banks, Western Alliance (+28%) and First Citizens Bank (+24%) which benefitted from positive second quarter earnings prints, as well as the broader sector rotation. Also doing well were companies that benefit from a lower interest rate environment such as homebuilder Pulte Group (+20%) and credit reporting agency Equifax (+15%). The biggest detractors in July were concentrated in the semiconductor industry as the market grew sceptical about the sustainability of AI spending. Equipment makers LAM Research (-11%) and ASML (-8%) were hit particularly hard, not helped by threats from the US government to expand trade restrictions on selling chips to China. 

Given the changes in the growth outlook and looming uncertainty over US elections, we expect the current volatility in markets to continue, which may crimp short term returns. However, as is often the case in choppy markets, the silver lining is that there will likely be plenty of buying opportunities in quality stocks that will benefit long term portfolio returns.

New Zealand & Australian equities

The local share market enjoyed a strong month in July, propelled by a modest tweak to commentary by the Reserve Bank of New Zealand in its Monetary Policy Review released during the month. The minor change and weaker-than-expected headline inflation data saw the fixed interest markets price in three 0.25% cuts to the official cash rate this year, when only one cut was priced in at the start of the month.

Stocks exposed to the economy also enjoyed a strong month as some investors expressed a view that rate cuts would see the consumer recover and economic activity rebound. For instance, KMD Brands (the owner of Kathmandu and Rip Curl) was up +27%. We would caution against getting too excited about rate cuts right now because they have a lagged effect meaning it can take 12 to 18 months for the impact of cuts to be reflected in the economy.

Arguably, the bigger news for the domestic stock market was that the bidders for retirement village operator Arvida Group returned, this time offering an unconditional bid with Board support. It looks like there are limited risks to the deal proceeding, and so the share price moved to a 5% discount to the bid price. Arvida was up an astonishing +74% during the month. Arvida has been one of our core aged care holdings, and so this was a strong contributor to performance during the month. 

Top Holdings as of the 31st of July 2024

Generate total Funds Under Management (FUM) as of 31st of July 2024: $5,939,901,564.06

International Equities

August was a volatile month for global equity markets. The MSCI World Index had fallen by as much as -7% in early August as fears of an impending recession spread through the market. The World Index then rallied 10% as those fears abated, finishing the month 2.64% higher in USD terms. 

The NZ Dollar also had a volatile month with the rising 5.0% against the USD. Combined, the aforementioned moves meant that world equity markets fell -2.2% in August in NZD terms. 

We believe that trying to adjust our portfolios to reflect these short-term moves is counterproductive, and that we can generate better long-term investment performance by focusing on owning high quality, growing businesses whose stocks are trading at reasonable valuations. 

With that in mind, it was pleasing to see that several of our stocks delivered strong performances during the month. Weight-loss drug manufacturer Eli Lilly gained +19.5%, Uber gained +13.4% and Walmart gained +12.8% after each company delivered strong earnings for shareholders. 

On the other hand, pharmaceutical distributor McKesson had a tougher result, reporting disappointing earnings after several months of strong performance. This led the stock to fall -9.0% during the month. We continue to believe McKesson offers very good value and we have increased the size of our investment during what we believe is an unjustified selloff. 

New Zealand & Australian equities

Companies across New Zealand and Australia began delivering their latest round of earnings reports in August, giving us a chance to assess their performance in the current economic environment.  

So far, a broad range of results have unfolded leading the S&P/NZX50 to rise only 0.3%, in aggregate, over the month. On one hand, Kathmandu rose 28.1% after posting better-than-expected results, surprising the market with increasing sales momentum. On the other hand, A2 Milk dropped -23.3% after reporting a decline in profit margins (more on this below).  

The Australian market was remarkably similar to the NZ market, rising 0.5% over the month. 

Some of the strongest performing stocks in the portfolio came from the Real Estate Investment Trust (REIT) sector, which rose 7.2% for the month - the largest one month gain since last December. This positive return was driven by the Reserve Bank’s cut in the Official Cash Rate (OCR), signaling the potential for a new phase in the interest rate cycle. REIT’s are interest rate sensitive investments, so the OCR cut was a welcome relief for the sector. Precinct, which is mostly an office landlord, rose 10.7%, and Stride, a diversified property manager, rose 14.1%. Meanwhile, Chorus, which owns and operates New Zealand’s largest fibre internet network, increased 8% after posting solid results and offering a material increase in dividend returns. 

Spark produced an underwhelming set of results, missing their earnings guidance set in May, and underdelivering against the market’s expectations. Spark cited the weak economy and the Government’s spending cuts as the primary reasons for their earnings miss. The market is now questioning Spark’s ability to maintain its dividends as the company’s cashflow is currently insufficient to support further dividend growth.  

A2 Milk crashed back to earth, falling -23.3% in August (but the stock is still up 33% year to date). The company provided a softer earnings outlook for 2025, driven by lower birth rates in China, and supply chain issues at Synlait’s Auckland plant, which diluted profit margins. 

Returns to the 31st of August 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 new funds in May 2022, our original Conservative Fund was 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.

Top Holdings as of the 31st of August 2024

Generate total Funds Under Management (FUM) as of 31st of August 2024: $6,022,264,576.70

International Equities

Global equities gained +1.7% in September with most major regions finishing in the green on expectations of looser monetary policy and resilient labour markets. China stole the headlines in the middle of the month when it announced a surprise stimulus package aimed at lowering borrowing costs and boosting credit demand. The news was well received by the market, with Chinese equities rising +22% and Hong Kong equities up +18% over the month. It remains to be seen whether these latest stimulus measures will re-ignite the Chinese economy, but with the Chinese share market still -22% below its 2021 highs, a lot of pessimism is arguably baked in.

Generate’s global shares modestly outperformed the index in September. Once again, amongst the best performers were stocks exposed to the ramp in AI investment, such as datacentre services and infrastructure company, Vertiv Holdings, and semiconductor companies, Broadcom and Advanced Micro Devices. Travel companies also bounced back on stronger economic news, with Delta Airlines and Royal Caribbean Cruises both enjoying healthy gains.

At the other end of the scale, healthcare stocks performed poorly in September, with stock-specific issues hurting sentiment towards pharmaceutical companies like Merck and Regeneron. Despite the negative short term price action, we have confidence in the durability of both companies’ franchises.

A rising NZ dollar dampened the returns of our offshore holdings.

New Zealand & Australian equities

The local market gave back some of its August gains over the month of September, with the broad market (S&P/NZX 50) index declining -0.2%. Domestic property stocks in particular have endured a wild ride; after a very strong August, they gave back more than half that in September, dropping -4.4% (measured by the S&P/NZX Property Index).

In a weak month, the Australasian stocks held by the funds generally performed well. The highlights were Manawa Energy (+26%) and Infratil (+11%), both of which benefitted from Contact Energy's takeover offer for Manawa. Manawa Energy owns 26 small hydroelectric schemes scattered around the country. These schemes produce more electricity in winter, making them valuable to Contact Energy whose hydroelectricity facilities have a summer bias. Infratil shares appreciated on the news because it owns just over half of Manawa Energy.

On the negative side of the ledger, Spark continued to perform poorly. Following a disappointing result in August, market participants started speculating that it could exit the all-important MSCI World Index. This would see all of the passive funds that follow the index sell their Spark shares. We generally see such events as an opportunity. We like to take advantage of passive managers' indiscriminate buying or selling by focusing on the long-term fundamentals of the business and taking advantage of temporary pricing anomalies.

Returns to the 30th of September 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 new funds in May 2022, our original Conservative Fund was 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 for KiwiSaver Funds and here for Managed Funds.

Top Holdings as of the 30th of September 2024

Generate total Funds Under Management (FUM) as of 30th of September 2024: $6,146,284,953.20