Generate Fund Performance - October 2023

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Returns to the 31st of October 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 

-2.25%

9.28%

6.65%

8.45%

8.21%

Growth
Fund 

-2.07%

6.98%

6.20%

7.93%

7.63%

Moderate
Fund*** 

-1.19%

4.04%

3.65%

5.04%

4.69%

Balanced Fund^

-1.71%

4.76%



2.80%

Conservative Fund^

-0.65%

3.03%



1.18%

Defensive Fund^

-0.07%

3.19%



1.25%



Generate Managed Funds:


 1 Month

1 Year

5 Year (p.a.) 

10 Year (p.a.)

Since inception** (p.a) 

Focused Growth Managed Fund***

-2.26%

9.19%

 


3.87%

Balanced Managed Fund^

-1.69%

5.16%

 


2.92%

Conservative Managed Fund^

-0.63%

 3.43%

 


1.07%

Thematic Managed Fund^^

-0.01%





Australasian Managed Fund^^

-3.96%





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


World markets fell in October with the MSCI World index declining -2.9% in USD terms but rising 0.2% in NZD terms due to a weakening NZ dollar.


Global interest rates rose during the month, adding pressure to stock prices because higher interest rates reduce the attractiveness of stocks compared to other investments. As an example, the US 10-year Treasury yield (the rate you can earn by lending money to the US government for 10 years) rose from 4.57% to 4.93%, which is the highest level it’s been since 2007.


In October, we saw resilient third quarter results from many companies that led to strong contributions to our portfolios, including datacentre networking business Arista Networks (+8.9%), waste companies Waste Management (+7.8%) and Republic Services (+4.2%), Microsoft (+7.1%), United Health (+6.2%), GLP-1 drug makers Novo Nordisk (+6.2%) and Eli Lilly (+3.2%), and Amazon (+4.1%).


Our weakest performer was medical device maker InMode, which fell -37% during the month after facing two challenges. First, the company revised its full-year revenue guidance lower early in October after higher interest rates led InMode’s customers to reduce their orders for the company’s devices.


Second, InMode is based in Israel and the company’s stock sold off after the October 7th attacks as the prospect of full-scale war between Israel and Hamas intensified. InMode has since confirmed that its staff were safe, and that the company does not believe its operations would be directly impacted by the war.


InMode recovered some of this lost ground in early November, rising 14% on November 2nd after reporting their third quarter results that allayed the market’s worst fears regarding the company’s growth prospects. We remain confident in our analysis of InMode’s prospects, and we are happy to keep holding the stock. 


New Zealand & Australian equities


The NZ share market followed offshore markets by declining -4.8% in October as measured using the S&P NZX50 Index. The decline was relatively broad-based with only three holdings achieving a positive return over the month.

Several companies with a June year-end host their annual shareholder meeting in October, which provide management the opportunity to update the market on how their companies are progressing.


Both Freightways (a parcel delivery and information management company) and Port of Tauranga (NZ’s largest port) provided updates that were weaker than the outlooks they had supplied in August when they released their financial results. At this stage, it is very difficult to know if this is just a little wobble caused by the election or if it is a sign of the economy slowing down. We continue to be cautious and hold a minimal proportion of the portfolios in companies that have significant exposure to cyclical domestic growth. However, we took advantage of some attractive prices and added to our holdings in Mainfreight and Freightways during the month.


The three companies generating positive returns over October were Stride (+7.7%), Spark (+3.3%) and EBOS (+2.3%). Stride enjoyed a recovery in its share price after falling heavily in September. Spark and EBOS are both considered reliable, albeit modest, growers and thus a safe place to hide during a tough month.


The largest decline in our Australasian equity holdings during the month was Mirvac (-14.6%), which fell due to higher interest rates and concerns about the Australian residential property market’s health. We continue to believe in their management team, and we are optimistic about several of their assets. We therefore took the opportunity to add to our holding.



Top Holdings as of the 30th of September 2023

International Equities 

Microsoft

Berkshire Hathaway

Meta Platforms

Nvidia

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

Mercury NZ

Fixed Income

Kāinga Ora Bonds 

Local Government Funding Agency Bonds 

TR Group Bonds

Westpac Bonds

Contact Energy Bonds



Generate total Funds Under Management (FUM) as of 30th of September 2023: $4,274,735,798


Generate Fund Performance - November 2023

Categories

Authors

Generate contributor

Published


section image

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


Generate Fund Performance - February 2024

Authors

Generate contributor

Published


section image

Returns to the 29th of February 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 

3.79%

22.55%

9.22%

9.92%

9.54%

Growth
Fund 

2.72%

17.94%

8.26%

9.18%

8.72%

Moderate
Fund*** 

0.85%

10.21%

4.81%

5.80%

5.33%

Balanced Fund^

1.59%

13.08%



8.38%

Conservative Fund^

0.29%

7.62%



4.44%

Defensive Fund^

0.00%

5.71%



3.14%



Generate Managed Funds:


 1 Month

1 Year

5 Year (p.a.) 

10 Year (p.a.)

Since inception** (p.a) 

Focused Growth Managed Fund***

3.70%

22.33%

 


7.43%

Balanced Managed Fund^

1.57%

13.16%

 


8.52%

Conservative Managed Fund^

0.29%

 7.72%

 


4.33%

Thematic Managed Fund^^

7.20%





Australasian Managed Fund^^

-0.92%





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

International Equities 

Microsoft

Amazon

Berkshire Hathaway

CRH

Meta Platforms

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 

Westpac Bonds

TR Group Bonds

Contact Energy Bonds



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


Generate Fund Performance - March 2024

Authors

Generate contributor

Published


section image

Returns to the 31st of March 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 

3.68%

25.45%

9.46%

10.42%

9.83%

Growth
Fund 

3.25%

20.34%

8.38%

9.56%

8.97%

Moderate
Fund*** 

2.12%

11.16%

4.89%

5.95%

5.49%

Balanced Fund^

2.69%

14.85%



9.53%

Conservative Fund^

1.62%

8.05%



5.12%

Defensive Fund^

0.97%

5.52%



3.53%



Generate Managed Funds:


 1 Month

1 Year

5 Year (p.a.) 

10 Year (p.a.)

Since inception** (p.a) 

Focused Growth Managed Fund***

3.67%

25.19%

 


8.16%

Balanced Managed Fund^

2.67%

14.92%

 


9.65%

Conservative Managed Fund^

1.60%

 8.10%

 


5.02%

Thematic Managed Fund^^

2.69%





Australasian Managed Fund^^

3.61%





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

International Equities 

Microsoft

Amazon

Alaphabet

Berkshire Hathaway

Nvidia

External Managers 

T Rowe Price Global Equity Fund

Te Ahumairangi Global Equity Fund

Worldwide Healthcare Trust

CIM Infrastructure III Fund

European Opportunities Trust

Australasian Equities 

Infratil 

Contact Energy

Spark

Fisher & Paykel Healthcare

Auckland International Airport

Fixed Income

Local Government Funding Agency Bonds

Kainga Ora Bonds 

Westpac Bonds

ANZ Bonds

Investore Property Bonds



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


Generate Fund Performance - April 2024

Authors

Generate contributor

Published


section image

Returns to the 30th of April 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 

-2.96%

18.56%

7.96%

9.99%

9.45%

Growth
Fund 

-2.43%

14.86%

7.32%

9.14%

8.66%

Moderate
Fund*** 

-1.58%

8.04%

4.40%

5.65%

5.29%

Balanced Fund^

-1.87%

10.79%



8.06%

Conservative Fund^

-1.13%

5.90%



4.30%

Defensive Fund^

-0.45%

4.44%



3.14%



Generate Managed Funds:


 1 Month

1 Year

5 Year (p.a.) 

10 Year (p.a.)

Since inception** (p.a) 

Focused Growth Managed Fund***

-2.97%

18.30%

 


7.28%

Balanced Managed Fund^

-1.86%

10.88%

 


8.18%

Conservative Managed Fund^

-1.13%

 5.93%

 


4.19%

Thematic Managed Fund^^

-4.79%





Australasian Managed Fund^^

-1.37%





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

International Equities 

Microsoft

Amazon

Nvidia

Alphabet

Meta Platforms

External Managers 

T Rowe Price Global Equity Fund

Te Ahumairangi Global Equity Fund

Worldwide Healthcare Trust

CIM Infrastructure III Fund

European Opportunities Trust

Australasian Equities 

Infratil 

Spark

Fisher & Paykel Healthcare

Contact Energy

Auckland International Airport

Fixed Income

Local Government Funding Agency Bonds

Kainga Ora Bonds 

Westpac Bonds

ANZ Bonds

Investore Property Bonds



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


Disclaimers