Generate Fund Performance - November 2023

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Returns to the 30th of November 2023 

(after fees* and before tax) 


Generate KiwiSaver Funds:

1 Month 

1 Year 

5 Year (p.a.) 

10 Year (p.a.)

Since inception** 

(p.a.) 

Focused
Growth Fund 

5.07%

10.73%

7.48%

8.80%

8.65%

Growth
Fund 

4.46%

8.51%

6.90%

8.29%

8.02%

Moderate
Fund*** 

3.30%

5.42%

4.18%

5.36%

4.97%

Balanced Fund^

3.76%

6.32%



5.14%

Conservative Fund^

2.81%

4.43%



2.95%

Defensive Fund^

1.96%

4.15%



2.47%



Generate Managed Funds:


 1 Month

1 Year

5 Year (p.a.) 

10 Year (p.a.)

Since inception** (p.a) 

Focused Growth Managed Fund***

5.07%

10.62%

 


5.06%

Balanced Managed Fund^

3.78%

6.70%

 


5.28%

Conservative Managed Fund^

2.81%

 4.81%

 


2.85%

Thematic Managed Fund^^

6.38%





Australasian Managed Fund^^

3.28%





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

International Equities 

Microsoft

Berkshire Hathaway

Meta Platforms

Amazon

United Health Group

External Managers 

T Rowe Price Global Equity Fund

Te Ahumairangi Global Equity Fund

Worldwide Healthcare Trust

European Opportunities Trust

Magellan Global Fund Closed Class

Australasian Equities 

Infratil 

Spark

Contact Energy 

Fisher & Paykel Healthcare

Auckland International Airport

Fixed Income

Kāinga Ora Bonds 

Local Government Funding Agency Bonds 

TR Group Bonds

Westpac Bonds

Investore Bonds



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


Generate Fund Performance - December 2023

Authors

Generate contributor

Published


section image

Returns to the 31st of December 2023 

(after fees* and before tax) 


Generate KiwiSaver Funds:

1 Month 

1 Year 

5 Year (p.a.) 

10 Year (p.a.)

Since inception** 

(p.a.) 

Focused
Growth Fund 

3.89%

19.05%

9.10%

9.21%

8.96%

Growth
Fund 

3.64%

15.48%

8.16%

8.69%

8.31%

Moderate
Fund*** 

2.97%

9.96%

4.85%

5.69%

5.22%

Balanced Fund^

3.29%

11.84%



6.97%

Conservative Fund^

2.53%

7.92%



4.39%

Defensive Fund^

1.74%

6.33%



3.44%



Generate Managed Funds:


 1 Month

1 Year

5 Year (p.a.) 

10 Year (p.a.)

Since inception** (p.a) 

Focused Growth Managed Fund***

3.87%

18.91%

 


5.92%

Balanced Managed Fund^

3.28%

11.92%

 


7.11%

Conservative Managed Fund^

2.53%

 8.04%

 


4.29%

Thematic Managed Fund^^

3.75%





Australasian Managed Fund^^

4.58%





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

International Equities 

Microsoft

Berkshire Hathaway

Meta Platforms

Amazon

Nvidia

External Managers 

T Rowe Price Global Equity Fund

Te Ahumairangi Global Equity Fund

Worldwide Healthcare Trust

European Opportunities Trust

CIM Infrastructure III Fund

Australasian Equities 

Infratil 

Spark

Contact Energy 

Fisher & Paykel Healthcare

Auckland International Airport

Fixed Income

Kāinga Ora Bonds 

Local Government Funding Agency Bonds 

TR Group Bonds

Westpac Bonds

Investore Property Bonds



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


Generate Fund Performance - January 2024

Authors

Generate contributor

Published


section image

Returns to the 31st of January 2024 

(after fees* and before tax) 


Generate KiwiSaver Funds:

1 Month 

1 Year 

5 Year (p.a.) 

10 Year (p.a.)

Since inception** 

(p.a.) 

Focused
Growth Fund 

3.51%

17.97%

8.90%

9.76%

9.24%

Growth
Fund 

2.77%

14.26%

8.11%

9.07%

8.52%

Moderate
Fund*** 

1.10%

8.23%

4.87%

5.77%

5.28%

Balanced Fund^

1.87%

10.46%



7.77%

Conservative Fund^

0.48%

6.18%



4.46%

Defensive Fund^

0.03%

4.72%



3.28%



Generate Managed Funds:


 1 Month

1 Year

5 Year (p.a.) 

10 Year (p.a.)

Since inception** (p.a) 

Focused Growth Managed Fund***

3.51%

17.74%

 


6.66%

Balanced Managed Fund^

1.89%

10.55%

 


7.92%

Conservative Managed Fund^

0.46%

 6.27%

 


4.35%

Thematic Managed Fund^^

4.40%





Australasian Managed Fund^^

1.70%





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

International Equities 

Microsoft

Berkshire Hathaway

Amazon

Nvidia

CRH

External Managers 

T Rowe Price Global Equity Fund

Te Ahumairangi Global Equity Fund

Worldwide Healthcare Trust

European Opportunities Trust

CIM Infrastructure III Fund

Australasian Equities 

Infratil 

Spark

Contact Energy 

Fisher & Paykel Healthcare

Mercury

Fixed Income

Kāinga Ora Bonds 

Local Government Funding Agency Bonds 

TR Group Bonds

Westpac Bonds

ANZ AU Bonds



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


Disclaimers