Returns to the 30th of April 2024 

(after fees* and before tax) 

Generate KiwiSaver Funds:

Generate Managed Funds:

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

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

Returns to the 31st of May 2024 

(after fees* and before tax) 

Generate KiwiSaver Funds:

Generate Managed Funds:

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 new funds in May 2022, our original Conservative Fund was 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 bounced back in May, shaking off the gloom of a less-than-inspiring first quarter earnings season in the US and Europe. The Nasdaq was the star of the show, pulling back its losses from the previous month thanks to another outstanding earnings result from the king of AI, Nvidia. Expectations were already high leading up to the result as Nvidia’s dominance of the AI chip space is well known, but the sheer magnitude and quality of the earnings beat was impressive enough to send Nvidia shares up +27% for the month.

Our overweight position in Nvidia helped Generate’s global equities holdings deliver strong performance in May. Other companies in the technology arena also contributed strongly, such as Netflix, GoDaddy and Meta Platforms. Relative performance also benefited from not owning large-cap stocks that fell sharply in May, such as Tesla and Walt Disney, highlighting the advantages of our selective approach to investing. Our worst performing stock in May was the industrial manufacturing company, Atkore, which issued earnings guidance below market expectations in response to the uncertain economic outlook. While the result and share price reaction was disappointing, we like the cheap valuation and cyclicality of Atkore’s earnings to balance out some of the more expensive secular growth companies in the portfolio.

New Zealand & Australian equities

A weak economic environment and hawkish comments from the Reserve Bank of New Zealand (RBNZ), suggesting it will not cut the official cash rate until well into 2025, were enough to see the NZ share market drift lower in May (S&P/NZX 50 was down -0.8%).

There were a few companies that bucked the trend. The electricity generators/retailers all posted positive share price performances leading up to, and following an announcement that NZ's largest electricity consumer, the Tiwai Point aluminium smelter, had signed long-term electricity demand contracts removing the risk it would close later this year. The strongest share price performance came from Meridian Energy, the largest supplier to the smelter, up +12.7% in May.

Another strong performer was A2 Milk, which was up +14.9% for the month. Kantar data for April confirmed that the company was growing its share of the Chinese infant formula market. This suggests that all things equal, it should comfortably hit earnings guidance in August.

Summerset Group, a retirement accommodation provider listed on the NZ stock exchange, declined -14.4% in May. In part, this was due to the hawkish comments made by the RBNZ, which suggested a recovery in the housing market is unlikely to occur in the near term. The housing market is a key driver of retirement village operator returns. Selling pressure was intensified when one of Ryman’s largest shareholders moved to exit their entire holding, representing a little more than 5% of the company. Ryman is one of Summerset's competitors, so some investors no doubt sold Summerset stock to take advantage of this opportunity. As long-term patient investors, we are not overly concerned that the housing market recovery could be temporarily delayed, so we are happy to maintain the fund’s holding in Summerset.

Top Holdings as of the 31st of May 2024

Generate total Funds Under Management (FUM) as of 31st of May 2024: $5,398,559,553

Returns to the 31st of May 2024 

(after fees* and before tax) 

Generate KiwiSaver Funds:

Generate Managed Funds:

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 new funds in May 2022, our original Conservative Fund was 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 posted a solid month of gains in June (+2.1% in USD, +2.8% in NZD as measured by the MSCI World Index) fuelled by growing confidence in AI-related stocks. 

While these gains are encouraging – and they led to gains for many of our investments (see below) – the fact that many stocks across the market didn’t show the same strength does warrant some caution. We are monitoring these developments closely and have made some adjustments to our portfolios to reflect them. 

Semiconductor companies were the top performers in our global portfolios with Broadcom (+21.7%) being our best-performing stock whilst TSMC (+15.9%) and Nvidia (+12.7%) also delivered attractive returns. The stock prices for these companies gained over June as investors continued to raise their growth estimates for AI chip makers due to the enormous levels of AI-related investments being made by Big Tech companies. Enterprise software company ServiceNow also had a good month, gaining 20.2% in June to rebound from a weaker period in prior months. 

Our worst performer during the month was UK-based payments business Wise, which lowered its margin guidance to levels that, we believe, are extremely conservative. We continue to hold our (relatively small) investment in the company. 

New Zealand & Australian equities

June was another weak month for the local market with the S&P/NZX50 declining -1.3%. This performance was particularly weak compared to the Australian market, which rose 1% over the same period. 

New Zealand companies exposed to discretionary consumer spending continued to come under pressure, with The Warehouse Group and Kathmandu both announcing another round of earnings downgrades. We are not invested in either of these companies.  

The Australasian portfolio’s strongest performers for the month were Infratil (+7.1%), Insurance Australia Group (+7.4%), and National Australia Bank (+6.3%). Infratil’s performance was particularly impressive given the $1.15bn capital raise they successfully executed on 17-18 June. The capital raised by this issue will be used to fund growth opportunities in their infrastructure portfolio. For example, half of the $1.15bn will be deployed to a company called Canberra Data Centres, which is increasing its development pipeline and bringing forward new capacity development due to persistently strong demand for their leases. Infratil’s capital raise was well supported by the market with the share price closing 10% above the raise price of $10.15.  

Insurance Australia Group (IAG) is a relatively new addition to the portfolio and has an appealing outlook. Late in the month, IAG released an update to the market announcing a new 5-year reinsurance deal with Warren Buffett’s Berkshire Hathaway. We believe the deal will benefit IAG over the long term by reducing catastrophe claim costs and stabilising future earnings.  

Goodman Property trust (GMT) and Meridian Energy (MEL) were the portfolio’s largest detractors for the month, down -7.6% and -7% respectively. As discussed last month, MEL’s share price jumped strongly in May when they signed 20-year demand contracts with the Tiwai Point Smelter. MEL’s slide in June was likely due to investors locking in profits by selling some of their holdings after the market’s initial enthusiastic reaction. There was no substantive news from GMT to explain their decline.  

Top Holdings as of the 30th of June 2024

Generate total Funds Under Management (FUM) as of 30th of June 2024: $5,595,622,249.05