Generate Fund Performance - December 2023

Returns to the 31st of December 2023 

(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 equity markets enjoyed strong performance in December, gaining 4.9% in USD and 1.8% in NZD. This combination of strong equity markets and weaker USD was driven by solid economic data, benign commentary from several Federal Reserve governors suggesting they are closer to easing monetary policy earlier than expected, and results from December’s Federal Reserve meeting that supported this narrative.

Our strongest performers in this environment were some of the more cyclical businesses that we own: regional bank Western Alliance gained 28.4%, electrical infrastructure supplier Atkore rose 23.2%, semiconductor business AMD ended the month 21.7% higher, and homebuilder Pulte Homes finished up 17.0%. Western Alliance, Atkore, and Pulte had each followed a similar pattern in the second half of the year, with a strong period through late July, pulling back August through October with the broader market, then finishing strongly in November and December to end the year at or near their highs.

Medical device maker InMode underperformed in December, slipping back 6.4% as it reduced expectations for Q4 revenues and profits. InMode has not performed to our expectations, and we are monitoring its performance especially closely. In this regard, we were pleased to receive an update in mid-January that confirmed their prior guidance for Q4 results and issued solid initial guidance for 2024 revenues.

New Zealand & Australian equities

The local share market followed the lead of offshore share markets, rallying strongly in December. Specifically, the S&P/NZX 50 Index was up 3.9% over the month, while NZ Real Estate Investment Trusts collectively rose 7.3%, as measured by the S&P/NAREIT Index.

Ironically, economic data was decidedly negative. The third quarter GDP release during the month was well below expectations, and the historic results were also revised downwards. On top of this, electronic spending data suggested that this weakness had continued into the fourth quarter.

The key driver for the strength in share markets was the sharp reduction in market interest rates during the month, catalysed by the Federal Reserve’s surprise pivot towards loosening financial conditions. The Federal Reserve unexpectedly signalled the prospect of rate cuts in 2024, and while markets had already been pricing this event in across 2024, it was the first such time that the Federal Reserve acknowledged such a prospect.

It is probably not surprising that the strongest performing holding (ignoring our tiny holding in My Food Bag) was Investore, a property investment company holding with a portfolio that is primarily made up of large tenants such as Bunnings and Countdown. The earnings and dividends of this company are largely locked in for the next few years, so it is considered an alternative to bonds. Lower interest rates on bonds make them less attractive, so some investors will chase the attractive yield paid by Investore.

At the other end of the spectrum, EBOS Group was weak. News that a competitor, Sigma, was merging with Chemist Warehouse, formerly a large customer of EBOS, was clearly viewed negatively. While the transaction presents risks to EBO, on balance, we see this as an opportunity for EBOS to gain some market share off Sigma. Their chemist customers compete directly with the Chemist Warehouse and they could well review their wholesaler arrangements.

Top Holdings as of the 31st of December 2023

Generate total Funds Under Management (FUM) as of 30th of November 2023: $4,737,453,887