Generate Fund Performance - October 2023
Returns to the 31st of October 2023
(after fees* and before tax)
Generate KiwiSaver Funds:
5 Year (p.a.)
10 Year (p.a.)
Generate Managed Funds:
5 Year (p.a.)
10 Year (p.a.)
Since inception** (p.a)
Focused Growth Managed Fund***
Balanced Managed Fund^
Conservative Managed Fund^
Thematic Managed Fund^^
Australasian Managed Fund^^
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.
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
United Health Group
T Rowe Price Global Equity Fund
Te Ahumairangi Global Equity Fund
Worldwide Healthcare Trust
European Opportunities Trust
Magellan Global Fund Closed Class
Fisher & Paykel Healthcare
Kāinga Ora Bonds
Local Government Funding Agency Bonds
TR Group Bonds
Contact Energy Bonds