Save smarter with Generate Managed Funds

Investing in a Generate Managed Fund could be an effective way to get ahead and reach your savings goals faster.

If you’re parking most of your money in the bank, it probably isn’t going to take you anywhere in a hurry. Savings accounts don’t earn very much interest at all these days, and the return from term deposits is nothing like what is was even a few years ago.

Thankfully there’s another option you can consider to potentially help grow your savings, that’s simple to set up and easy to access. It’s called a managed fund – sometimes also known as an investment fund.

You’re probably already in a managed fund

It’s most likely you are already invested in a managed fund – that’s technically what KiwiSaver funds are. The main difference being, with KiwiSaver, you can’t just withdraw your money from the fund whenever you want to – KiwiSaver is specifically set up to help you save for your first home or retirement, so you can only make a withdrawal for these purposes.

But the concept of how your money is invested and how your balance can potentially grow over time in a managed fund is the same as a KiwiSaver fund.

So what exactly is a managed fund?

Essentially, it’s a fund where investors’ money is pooled together and invested by expert fund managers in a diverse range of asset classes, like shares (equities), bonds, property and cash.

As a New Zealand (NZ) investor you get access to global companies, asset classes and capital markets you might not be able to easily invest in as an individual.

There’s also the huge benefit, that with a managed fund your money is invested by professional fund managers, who are constantly analysing data, anticipating events, researching new investment opportunities, and rebalancing and fine-tuning the fund’s investments in order to optimise returns.

Are managed funds all pretty much the same?

No, they are not all the same, so you should do your homework and find the fund that best suits your financial goals, investment timeline, and appetite for risk.

Just like KiwiSaver funds, managed funds can have conservative or aggressive investment growth goals. The asset allocation of each particular fund will influence its investment profile.

At Generate we have three Managed Funds for members to choose from:

• Focused Growth Managed Fund
• Balanced Managed Fund
• Conservative Managed Fund

The Generate Focused Growth Managed Fund invests mostly in ‘growth assets’ (things like shares (equities), property and infrastructure), rather than income assets (like bonds and cash) as growth assets have the potential to achieve higher returns over the long term – although they are also more vulnerable in times of market volatility. This is why this fund is usually recommended for long-term investors – those looking to invest for 8+ years – as they have time to ‘ride out’ any market downturns.

The Generate Conservative Managed Fund has a majority of investments in ‘income assets’, which are typically less risky and less susceptible to market volatility (although returns can still go up and down).

For more information on how Generate Managed Funds are invested, click here

Active or passive fund management?

There’s another thing to consider with managed funds (or investment funds) – whether they are actively or passively managed. Actively managed funds are those where a fund manager is very hands-on, making frequent decisions about where and in what the fund is invested.

Passively managed funds are much more hands-off and investment decisions are tied to various global indexes. With passively managed funds, you are buying the market – the good companies, the average companies and the bad ones. There is plenty of research and statistics to validate both methods. However, we believe in active management, and let our results speak for themselves. See how Generate compares to the market averages here.

Is a managed fund the same thing as a unit trust?

Yes. Managed funds are made up of units, each unit representing a single share in the overall value of the fund. Often these funds are structured as trusts. The individual units are designed to be liquid; i.e. easily tradeable/convertible at a given price on a given day, so investors can move money into and out of a managed fund relatively quickly and easily.

Want to find out about Generate Managed Funds?

Generate offers three Managed Funds. You can find out more about how they are structured here.

And if you would like to save smarter, talk to an adviser about opening a Generate Managed Fund account of your own by calling us on 0800 855 322 or emailing us at advice@generatekiwisaver.co.nz.