Returns to the 30th of November 2023 

(after fees* and before tax) 

Generate KiwiSaver Funds:

Generate Managed Funds:

Except 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 markets bounced back strongly in November, buoyed by signs that inflation has peaked, and that therefore the US Federal Reserve may be finished hiking rates. The fall in yields provided the impetus for investors to shift money back into equities, with the US, Europe and Japan all posting local currency gains of more than +7%.

The gains were spread across a range of industries, and not just concentrated in high profile technology names, which is an encouraging sign for the market. Among the best performers in our global portfolios were companies that had borne the burden of higher rates through much of 2023, including industrial real estate leader Prologis and ratings agency Moody’s. Small and mid-cap stocks also rose strongly which benefitted holdings such as regional bank Western Alliance and medical technology company InMode.

Our portfolios were also buoyed by a number of strong results from a diverse range of companies. Salesforce posted a big earnings beat that bodes well for the wider software industry, Ulta Beauty’s healthy sales performance defied fears of weaker retail spending, and Nvidia enjoyed another mammoth quarter of growth for its AI-ready chips, pulling up the wider semiconductor industry even as its own share price fell victim to profit taking.

While the prospect of slower economic growth in 2024 may challenge earnings forecasts in certain areas of the market, there are enough pockets of strength for us to remain cautiously optimistic about equity returns over the coming year.

New Zealand & Australian equities

Notwithstanding that the local reporting season highlighted a number of poor results, the New Zealand share market was strong in November rising +5.3%, driven mostly by some of the larger constituents.

Mainfreight was a standout performer in the month returning +17.7%. Back in July, Mainfreight issued a material earnings downgrade relative to market forecasts and expectations for last month’s result were very low. Yet the company delivered upbeat commentary alongside a satisfactory result, and called out that their expectation was that they were now in a more normalised trading environment. Mainfreight, of course, was a huge beneficiary of Covid-19 induced demand and pricing power that came about as a result of supply chain bottlenecks. The company thinks that those benefits have now fully unwound, and that the most recently reported results can form a base for new earnings growth in periods ahead. Interestingly, the market appeared unconcerned about disappointing trading in the United States and Europe, which we will continue to monitor.

Another standout performer was Fisher and Paykel Healthcare. The company delivered a result that was in line with profit expectations and reconfirmed guidance. Management also reiterated their confidence in achieving a more normal profit margin in the years ahead, and as a result, Fisher and Paykel’s share price closed +13.2% higher over the month. The Home Care division was a highlight of this result. This division is of particular interest to the market because the introduction of new weight-loss drugs, namely GLP-1s, could reduce demand for its products treating sleep apnea. The market has interpreted the potential for widespread GLP-1 adoption as having the potential to reduce the growth of Fisher and Paykel’s Home Care market. It’s early days yet, but Home Care was shown to have grown +25% in the results, alongside Group revenue that grew +16%.

On the downside, the portfolio’s worst performance in the month came via Arvida Group, who own and operate senior care living facilities across New Zealand. Their shares slid -9.5% as the company disappointed on new sales volumes, which resulted in a higher than hoped-for level of debt. Post Ryman Healthcare’s material equity raising in February, which was used to reduce debt levels, the market has been laser focused on the rest of the sector’s debt. Much of Arvida’s increase in debt was explained well on the results call, but the market’s impatience for progress on a reduction took the shares lower. While the housing market (a key driver for the sector) appears to be settling, we have not been adding exposure to the sector for some time and will look for further signs of cash flow improvements before doing so.

Top Holdings as of the 30th of November 2023

Generate total Funds Under Management (FUM) as of 30th of November 2023: $4,526,410,878

Returns to the 31st of December 2023 

(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 enjoyed strong performance in December, gaining 4.9% in USD and 1.8% in NZD. This combination of strong equity markets and weaker USD was driven by solid economic data, benign commentary from several Federal Reserve governors suggesting they are closer to easing monetary policy earlier than expected, and results from December’s Federal Reserve meeting that supported this narrative.

Our strongest performers in this environment were some of the more cyclical businesses that we own: regional bank Western Alliance gained 28.4%, electrical infrastructure supplier Atkore rose 23.2%, semiconductor business AMD ended the month 21.7% higher, and homebuilder Pulte Homes finished up 17.0%. Western Alliance, Atkore, and Pulte had each followed a similar pattern in the second half of the year, with a strong period through late July, pulling back August through October with the broader market, then finishing strongly in November and December to end the year at or near their highs.

Medical device maker InMode underperformed in December, slipping back 6.4% as it reduced expectations for Q4 revenues and profits. InMode has not performed to our expectations, and we are monitoring its performance especially closely. In this regard, we were pleased to receive an update in mid-January that confirmed their prior guidance for Q4 results and issued solid initial guidance for 2024 revenues.

New Zealand & Australian equities

The local share market followed the lead of offshore share markets, rallying strongly in December. Specifically, the S&P/NZX 50 Index was up 3.9% over the month, while NZ Real Estate Investment Trusts collectively rose 7.3%, as measured by the S&P/NAREIT Index.

Ironically, economic data was decidedly negative. The third quarter GDP release during the month was well below expectations, and the historic results were also revised downwards. On top of this, electronic spending data suggested that this weakness had continued into the fourth quarter.

The key driver for the strength in share markets was the sharp reduction in market interest rates during the month, catalysed by the Federal Reserve’s surprise pivot towards loosening financial conditions. The Federal Reserve unexpectedly signalled the prospect of rate cuts in 2024, and while markets had already been pricing this event in across 2024, it was the first such time that the Federal Reserve acknowledged such a prospect.

It is probably not surprising that the strongest performing holding (ignoring our tiny holding in My Food Bag) was Investore, a property investment company holding with a portfolio that is primarily made up of large tenants such as Bunnings and Countdown. The earnings and dividends of this company are largely locked in for the next few years, so it is considered an alternative to bonds. Lower interest rates on bonds make them less attractive, so some investors will chase the attractive yield paid by Investore.

At the other end of the spectrum, EBOS Group was weak. News that a competitor, Sigma, was merging with Chemist Warehouse, formerly a large customer of EBOS, was clearly viewed negatively. While the transaction presents risks to EBO, on balance, we see this as an opportunity for EBOS to gain some market share off Sigma. Their chemist customers compete directly with the Chemist Warehouse and they could well review their wholesaler arrangements.

Top Holdings as of the 31st of December 2023

Generate total Funds Under Management (FUM) as of 30th of November 2023: $4,737,453,887

Returns to the 31st of January 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 equities enjoyed positive momentum in January with strong rallies across most major regions including the US, Europe, and Japan. Indices in China and Hong Kong missed out on the rally, however, due to concerns about slowing economic growth and geopolitical tensions.

In the key US market, the Communications Services sector was the best performer, aided by a bumper quarterly result from TV streaming giant, Netflix. Technology shares also did well, particularly semiconductor stocks, with Nvidia rising another +24% in the month and Advanced Micro Devices increasing +14%. The European semiconductor equipment giant, ASML, was another big gainer, rising +17% in January after the company painted a bright picture for the industry, fuelled by AI demand.

Overall, early earnings results for the December quarter have been good enough to justify the robust rally in global equities over the past year. The missteps to date have been largely company or industry specific rather than indicative of weakening economic conditions. For example, Alphabet sold off post earnings after flagging higher capex for AI development, and United Health’s stock was weak due to elevated US medical costs.

February will bring more quarterly earnings, with a raft of consumer stocks reporting, which investors will be pouring over for signs of weakening demand. While we are becoming incrementally more cautious on some areas of discretionary spending – travel, apparel – there are few signs, to date, of the recession that many have predicted for 2024.

New Zealand & Australian equities

New Zealand and Australian share markets enjoyed a positive start to the year with the S&P/NZX50 rising +0.9% and the S&P/ASX200 rising +1.2%. After producing very strong returns in December, New Zealand listed property trusts in aggregate fell -0.4%.

There were multiple notable performers within the Australasian portfolio in the month, with the most impressive being Summerset, Infratil and the Australian banks.

Summerset released their fourth quarter operating statistics, including new retirement village unit sales and resales of existing units, which were ahead of analysts' expectations. Summerset has been operating in a challenging environment over the last 12 months with respect to their exposure to the housing market, and in this context the results were well received. Summerset’s share price rose +7.2%.

Infratil rose +5.3% over the month and made an important announcement with respect to their portfolio holding in Canberra Data Centres (CDC). Late last year, Infratil had announced CDC’s intention to materially increase the capacity build to the tune of around 265MWs. In January, they followed this up with the announcement that they had signed contracts for the sale of 110MWs of capacity to new customers, reinforcing that the much talked about demand tailwinds for data centre capacity are alive and well.

The portfolio’s two Australian bank holdings, National Australia Bank and Westpac, enjoyed a strong start to the year rallying +6.2% and +5.6% respectively. There are a number of factors at play here, one of which is that the banks have potentially been much too conservative in their provisioning for bad loans. While the economy is slowing, it is slowing less rapidly than bank expectations. Should the economy continue to exhibit resilience, the reversal of these bad debt provisions will result in increased profits. A second reason is that net interest margins the banks are earning should have been increasing in recent months as their cost of borrowing has declined, while mortgage rates have remained stubbornly high.

On a negative note, one of the smaller retirement village and care operators, Oceania Healthcare, fell -7.9% in January. While there was no news released from the company, there was market speculation that the stock may be removed from a large global share index. The significance of this is that if the speculation proves accurate, it may bring about forced selling of the stock by passive funds that track that particular index.

Top Holdings as of the 31st of January 2024

Generate total Funds Under Management (FUM) as of 31st of January 2024: $4,919,834,337

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

Returns to the 31st of March 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 equities climbed higher in March but there was a marked change in the composition of winners and losers compared to the AI-driven rally of the past 12 months. Europe was the strongest region, Energy was the best performing sector, and Small Caps outperformed Large Caps. Many market pundits have taken this as a sign that the rally is broadening beyond the Magnificent Seven, a healthy sign for the overall market, and this is supported by recent economic data that suggest the global economy, particularly the US, is in better shape than anticipated. The downside to a strong economy could be higher inflation and subsequently higher for longer interest rates, typically a negative for equities. But for the moment at least, markets are taking the renewed inflation threat in their stride.

Our global investments had a mixed month relative to the index as many outperformers over the past year fell victim to profit-taking, particularly in the consumer sector where earnings results failed to meet lofty expectations (Lululemon, Ulta Beauty). On the positive side, gold producer Agnico Eagle Mines rallied +24% after posting earnings and production growth that topped market expectations. Bank holdings such as Western Alliance, JP Morgan and Bank of America all performed well, helped by positive outlook commentaries from management teams at recent financials’ conferences. Alphabet also staged a comeback after enduring a selloff earlier in the year, as the market debated whether the stock will ultimately be an AI winner or loser. 

New Zealand & Australian equities

The local share market enjoyed a solid month of gains. The broad market index, the S&P/NZX 50, was up +3.1%, and the S&P/NZX Real Estate index gained +3.8%. Following the busy reporting season in February, news flow over the month in the local market was limited.

The strongest performer in March was retirement developer and operator, Arvida Group, which rose +14.4%. This was a welcome gain given Arvida’s poor start to the year. In late 2023, Arvida announced it had received a non-binding indicative offer a few months earlier. This saw Arvida’s shares perform strongly into the end of 2023, but as it became less and less likely the bidder would be back with a revised offer, Arvida’s share price slumped. As we approach the financial year end it seems the market is refocusing on the business' fundamentals, which should have improved modestly. 

The Australian Stock Exchange listed property company, Mirvac Group, was also a strong performer, appreciating +10.4%. During the month, a strong set of employment numbers saw the unemployment rate decline from 4.1% to 3.7%. This suggests the Australian economy is unlikely to slip into a recession.

The weakest performing stock was EBOS Group, which is a healthcare distribution company and animal care supplier. Some market participants are speculating that the company may exit the MSCI World Index at the end of May which, if correct, would see a number of large passive funds sell their shares. This has caused early selling pressure from speculators and has driven the share price decline of -7.3% in March.

Top Holdings as of the 29th of February 2024

Generate total Funds Under Management (FUM) as of 31st of March 2024: $5,346,227,383.62

Returns to the 30th of April 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 share markets (measured by the MSCI World Index) posted a weaker month in April (-3.7% in USD, -2.5% in NZD), pulling back after a strong first quarter in which they rose +9.1% in USD and +15.4% in NZD. This pullback was primarily driven by rising bond yields, which reduces the relative attractiveness of stocks compared to other investments, like bonds. We believe the rise in interest rates are mainly a result of economic strength in the US, rather than a cause for concern over the medium term. This view was supported by the recent US earnings season, in which most of the companies we own reported robust earnings results for the first quarter of the year. 

The best performers in our global portfolios in April were our two recent investments in Hong Kong listed stocks AIA Insurance (+10.0%), and Hong Kong Exchange (+10.4%). These are high quality businesses that have been caught up in concerns about China’s economy. While each business has some economic exposure to China, we invested in them earlier this year after concluding that their ~30% share price fall over the prior 12 months meant that their shares offered a compelling risk/reward opportunity. 

Google owner Alphabet was also a strong contributor to returns, rising +7.9% for the month. The market was encouraged by the company’s technical strengths in AI, and excellent financial results for the first quarter. 

Our worst performer during the month was Ulta Beauty, which fell -22.6% over the month after management suggested that growth was slowing down, and the company was losing market share. We have since sold out of our position in Ulta. 

New Zealand & Australian equities

April was a soft month for the local market with the S&P/NZX50 declining -1.2%. In aggregate, just a quarter of NZX50 stocks posted positive returns over the month as sharp declines in consumer discretionary stocks more than offset a strong performance by the healthcare sector. The S&P/NZX Real Estate index declined -2.7%, while the S&P/AXS200 (a broad measure of the Australian share market) dropped -2.9%.  

Fisher and Paykel Healthcare was the strongest contributor to the portfolio over the month, returning +11%. A handful of minor events drove this performance. First, the company released a new nasal pillow mask for the treatment of obstructive sleep apnea. Sales for this mask are already underway in New Zealand and a launch into the North American market is scheduled for later this year. Second, a local broker analyst upgraded their stock recommendation on the company from underperform to neutral. While interesting, the basis of this upgrade centred largely on potential earnings growth many years into the future from new anaesthesia products. Lastly, Fisher and Paykel earn much of their revenue in US dollars. Over the month the USD strengthened against the NZD by 1.5%, which means that the company’s offshore earnings translated into higher NZD earnings.  

Other notable movers were My Food Bag, a small position for the funds, which rose +7.6% in April without any notable news. Perhaps it was recovering from weak performance in the month prior. More meaningfully, Meridian Energy climbed +1.5% with speculation mounting that a long-negotiated power deal with New Zealand Aluminium Smelters is imminent. The deal is expected to raise the power price received by Meridian for supplying the smelter’s energy. 

Mirvac Group underperformed in April, declining -12.7%. Australian listed real estate was particularly out of favour last month with the S&P/ASX Real Estate Investment Index index declining -7.8% over the month. A second detractor came from the portfolio’s holding in Ryman Healthcare. Readers may recall that Ryman produced a particularly poor market update in February, which set the tone for weak trading. Ryman’s CEO then abruptly resigned in late April, compounding the market’s already negative sentiment. Ryman’s Chairman will act as Executive Chair while the Board looks for a new CEO. Ryman also reaffirmed their February issued earnings guidance in the announcement. 

Top Holdings as of the 30th of April 2024

Generate total Funds Under Management (FUM) as of 30th of April 2024: $5,221,411,842.22

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 equities bounced back in May, shaking off the gloom of a less-than-inspiring first quarter earnings season in the US and Europe. The Nasdaq was the star of the show, pulling back its losses from the previous month thanks to another outstanding earnings result from the king of AI, Nvidia. Expectations were already high leading up to the result as Nvidia’s dominance of the AI chip space is well known, but the sheer magnitude and quality of the earnings beat was impressive enough to send Nvidia shares up +27% for the month.

Our overweight position in Nvidia helped Generate’s global equities holdings deliver strong performance in May. Other companies in the technology arena also contributed strongly, such as Netflix, GoDaddy and Meta Platforms. Relative performance also benefited from not owning large-cap stocks that fell sharply in May, such as Tesla and Walt Disney, highlighting the advantages of our selective approach to investing. Our worst performing stock in May was the industrial manufacturing company, Atkore, which issued earnings guidance below market expectations in response to the uncertain economic outlook. While the result and share price reaction was disappointing, we like the cheap valuation and cyclicality of Atkore’s earnings to balance out some of the more expensive secular growth companies in the portfolio.

New Zealand & Australian equities

A weak economic environment and hawkish comments from the Reserve Bank of New Zealand (RBNZ), suggesting it will not cut the official cash rate until well into 2025, were enough to see the NZ share market drift lower in May (S&P/NZX 50 was down -0.8%).

There were a few companies that bucked the trend. The electricity generators/retailers all posted positive share price performances leading up to, and following an announcement that NZ's largest electricity consumer, the Tiwai Point aluminium smelter, had signed long-term electricity demand contracts removing the risk it would close later this year. The strongest share price performance came from Meridian Energy, the largest supplier to the smelter, up +12.7% in May.

Another strong performer was A2 Milk, which was up +14.9% for the month. Kantar data for April confirmed that the company was growing its share of the Chinese infant formula market. This suggests that all things equal, it should comfortably hit earnings guidance in August.

Summerset Group, a retirement accommodation provider listed on the NZ stock exchange, declined -14.4% in May. In part, this was due to the hawkish comments made by the RBNZ, which suggested a recovery in the housing market is unlikely to occur in the near term. The housing market is a key driver of retirement village operator returns. Selling pressure was intensified when one of Ryman’s largest shareholders moved to exit their entire holding, representing a little more than 5% of the company. Ryman is one of Summerset's competitors, so some investors no doubt sold Summerset stock to take advantage of this opportunity. As long-term patient investors, we are not overly concerned that the housing market recovery could be temporarily delayed, so we are happy to maintain the fund’s holding in Summerset.

Top Holdings as of the 31st of May 2024

Generate total Funds Under Management (FUM) as of 31st of May 2024: $5,398,559,553

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