International Equities
August was a volatile month for global equity markets. The MSCI World Index had fallen by as much as -7% in early August as fears of an impending recession spread through the market. The World Index then rallied 10% as those fears abated, finishing the month 2.64% higher in USD terms.
The NZ Dollar also had a volatile month with the rising 5.0% against the USD. Combined, the aforementioned moves meant that world equity markets fell -2.2% in August in NZD terms.
We believe that trying to adjust our portfolios to reflect these short-term moves is counterproductive, and that we can generate better long-term investment performance by focusing on owning high quality, growing businesses whose stocks are trading at reasonable valuations.
With that in mind, it was pleasing to see that several of our stocks delivered strong performances during the month. Weight-loss drug manufacturer Eli Lilly gained +19.5%, Uber gained +13.4% and Walmart gained +12.8% after each company delivered strong earnings for shareholders.
On the other hand, pharmaceutical distributor McKesson had a tougher result, reporting disappointing earnings after several months of strong performance. This led the stock to fall -9.0% during the month. We continue to believe McKesson offers very good value and we have increased the size of our investment during what we believe is an unjustified selloff.
New Zealand & Australian equities
Companies across New Zealand and Australia began delivering their latest round of earnings reports in August, giving us a chance to assess their performance in the current economic environment.
So far, a broad range of results have unfolded leading the S&P/NZX50 to rise only 0.3%, in aggregate, over the month. On one hand, Kathmandu rose 28.1% after posting better-than-expected results, surprising the market with increasing sales momentum. On the other hand, A2 Milk dropped -23.3% after reporting a decline in profit margins (more on this below).
The Australian market was remarkably similar to the NZ market, rising 0.5% over the month.
Some of the strongest performing stocks in the portfolio came from the Real Estate Investment Trust (REIT) sector, which rose 7.2% for the month - the largest one month gain since last December. This positive return was driven by the Reserve Bank’s cut in the Official Cash Rate (OCR), signaling the potential for a new phase in the interest rate cycle. REIT’s are interest rate sensitive investments, so the OCR cut was a welcome relief for the sector. Precinct, which is mostly an office landlord, rose 10.7%, and Stride, a diversified property manager, rose 14.1%. Meanwhile, Chorus, which owns and operates New Zealand’s largest fibre internet network, increased 8% after posting solid results and offering a material increase in dividend returns.
Spark produced an underwhelming set of results, missing their earnings guidance set in May, and underdelivering against the market’s expectations. Spark cited the weak economy and the Government’s spending cuts as the primary reasons for their earnings miss. The market is now questioning Spark’s ability to maintain its dividends as the company’s cashflow is currently insufficient to support further dividend growth.
A2 Milk crashed back to earth, falling -23.3% in August (but the stock is still up 33% year to date). The company provided a softer earnings outlook for 2025, driven by lower birth rates in China, and supply chain issues at Synlait’s Auckland plant, which diluted profit margins.
Returns to the 31st of August 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
-0.27%
19.46%
8.78%
10.22%
9.85%
Growth
Fund
-0.13%
16.85%
7.61%
9.42%
9.02%
Balanced Fund^
0.14%
13.94%
9.60%
Moderate Fund***
0.20%
11.86%
4.53%
5.97%
5.66%
Conservative Fund^
0.42%
10.20%
5.90%
Defensive Fund^
0.62%
8.33%
4.52%
Generate Managed Funds:
1 Month
1 Year
5 Year (p.a.)
10 Year (p.a.)
Since inception** (p.a)
Focused Growth Managed Fund***
-0.13%
19.46%
8.39%
Balanced Managed Fund^
0.25%
14.07%
9.74%
Conservative Managed Fund^
0.36%
10.17%
5.81%
Thematic Managed Fund^^
0.66%
25.47%
25.41%
Australasian Managed Fund^^
0.29%
10.46%
7.71%
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.
Top Holdings as of the 31st of August 2024
International Equities
Apple
Nvidia
Microsoft
Amazon
Veriv
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
Fisher & Paykel Healthcare
Contact Energy
Spark
Auckland International Airport
Fixed Income
Local Government Funding Agency
NZ Govt Bonds
NZ Mortgages & Securities Bonds
Westpac NZ Bonds