Unit Prices as at 30 June 2021 ($)
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Focused Growth Trust:
Funds under Management as at 30 June 2021:
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The Generate Member Newsletter has been prepared by Generate Investment Management Limited. It is based on information believed to be accurate and reliable although no guarantee can be given that this is the case. Clients, directors or employees of Generate Investment Management Limited may have an interest or holding in companies and securities mentioned in the newsletter. No part of the newsletter is intended as financial advice. To see our Financial Advice Disclosure Statement, please see Generate FAP Disclosure Statement. For more information about the Generate KiwiSaver Scheme please refer to the Generate KiwiSaver Scheme Product Disclosure Statement. For more information about the Generate Focused Growth Trust please refer to the Generate Unit Trust Scheme Product Disclosure Statement or the fund updates. The issuer of both schemes is Generate Investment Management Limited and the Product Disclosure Statements are available at generatewealth.co.nz.
Welcome to the July edition of the Generate Member Newsletter.
June was a great month for your KiwiSaver Scheme with the funds continuing their strong run. Our ethical investment credentials were also on the rise as we were named a finalist for the Mindful Money "Best Ethical KiwiSaver Provider 2021" Award. The Awards Evening was a great night as it show-cased how far New Zealand's investment community has come regarding ethical investment and celebrated the industry leaders in this space.
Performance of the Generate Funds
Returns to 30 June 2021 (after fees* and before tax).
* Except the $3 per member per month administration expense that is charged to KiwiSaver members.
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Global share markets had a positive month appreciating 2.6% in June (when measured by the MSCI World Index in local currencies). Unusually, the strong performance in share markets was not accompanied with NZD currency strength. In fact, in June, the NZD decline increased the returns NZ investors received on their global share investments.
The underperformance of the New Zealand dollar over the past month was quite interesting. As discussed in our previous newsletter, the developing theme that central banks are starting to talk about raising interest rates has again been at the forefront of interest rate markets. With strong economic data, such as GDP printing at 1.6% for Q1 (three times higher than expected), New Zealand has been a leader in these developments. Markets are now expecting the Official Cash Rate to rise as soon as the end of this year, which has seen the spread between NZ and global yields widen. This combined with strength in agriculture commodity prices and a positive month in stock markets would typically see the NZD appreciate. However, the NZD was down -4.0% in June. The underperformance of the currency can be attributed to a couple of key drivers. Firstly, the US Dollar experienced broad based support. The dollar index, which measures the value of the USD relative to a basket of major US trade partners’ foreign currencies, appreciated 2.9% on the month. This came as reported US data was stronger than expected, and the market reacted to the US central bank (the Fed) pointing to the potential for hikes and normalisation of monetary policy over the coming years. Secondly, positioning. Traders had been long NZ Dollar as the market anticipated the RBNZ to be the first to hike interest rates and reduced this position after the strong GDP result mid-month.
Top Holdings as of 30 June 2021
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Knowledge Builder - CPI Inflation
The Consumer Price Index (CPI) is a measure of inflation for New Zealand households. The index measures the changing prices of a fixed basket of goods and services purchased by New Zealand households. The rate of change of this index, i.e., inflation, is a key input into the central bank's monetary policy framework and therefore interest rate setting. The CPI also impacts wage negotiations as it relates to the purchasing power of a given dollar.