Generate Fund Performance - July 2024

Returns to the 31st of July 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 rose in July, with the MSCI All Country Global Index up +1.5%, although the modest rise disguised some significant changes below the surface. The moves were largely triggered by softer inflation data, falling interest rates, and a spike in Donald Trump’s election chances post the failed assassination attempt (although this proved to be short-lived when Joe Biden withdrew his candidacy). The market predicted these forces would create a pro-business environment in the US, largely benefitting cyclical sectors such as Financials and Industrials. As a result, the Russell 2000 small cap index shot up more than +10% in July, far exceeding the +1.1% return of the S&P 500. Notably, the momentum and growth stocks that have powered the equity market rally year to date largely underperformed the market, with five of the “Magnificent Seven” stocks posting negative monthly returns (the exceptions being Tesla and Apple).

Generate’s global returns benefited from its diversified approach, with big gains in smaller cap holdings offsetting falls in large cap technology stocks. At the top of the returns table were two US regional banks, Western Alliance (+28%) and First Citizens Bank (+24%) which benefitted from positive second quarter earnings prints, as well as the broader sector rotation. Also doing well were companies that benefit from a lower interest rate environment such as homebuilder Pulte Group (+20%) and credit reporting agency Equifax (+15%). The biggest detractors in July were concentrated in the semiconductor industry as the market grew sceptical about the sustainability of AI spending. Equipment makers LAM Research (-11%) and ASML (-8%) were hit particularly hard, not helped by threats from the US government to expand trade restrictions on selling chips to China. 

Given the changes in the growth outlook and looming uncertainty over US elections, we expect the current volatility in markets to continue, which may crimp short term returns. However, as is often the case in choppy markets, the silver lining is that there will likely be plenty of buying opportunities in quality stocks that will benefit long term portfolio returns.

New Zealand & Australian equities

The local share market enjoyed a strong month in July, propelled by a modest tweak to commentary by the Reserve Bank of New Zealand in its Monetary Policy Review released during the month. The minor change and weaker-than-expected headline inflation data saw the fixed interest markets price in three 0.25% cuts to the official cash rate this year, when only one cut was priced in at the start of the month.

Stocks exposed to the economy also enjoyed a strong month as some investors expressed a view that rate cuts would see the consumer recover and economic activity rebound. For instance, KMD Brands (the owner of Kathmandu and Rip Curl) was up +27%. We would caution against getting too excited about rate cuts right now because they have a lagged effect meaning it can take 12 to 18 months for the impact of cuts to be reflected in the economy.

Arguably, the bigger news for the domestic stock market was that the bidders for retirement village operator Arvida Group returned, this time offering an unconditional bid with Board support. It looks like there are limited risks to the deal proceeding, and so the share price moved to a 5% discount to the bid price. Arvida was up an astonishing +74% during the month. Arvida has been one of our core aged care holdings, and so this was a strong contributor to performance during the month. 

Top Holdings as of the 31st of July 2024

Generate total Funds Under Management (FUM) as of 31st of July 2024: $5,939,901,564.06