Returns to the 31st of January 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 equities enjoyed positive momentum in January with strong rallies across most major regions including the US, Europe, and Japan. Indices in China and Hong Kong missed out on the rally, however, due to concerns about slowing economic growth and geopolitical tensions.

In the key US market, the Communications Services sector was the best performer, aided by a bumper quarterly result from TV streaming giant, Netflix. Technology shares also did well, particularly semiconductor stocks, with Nvidia rising another +24% in the month and Advanced Micro Devices increasing +14%. The European semiconductor equipment giant, ASML, was another big gainer, rising +17% in January after the company painted a bright picture for the industry, fuelled by AI demand.

Overall, early earnings results for the December quarter have been good enough to justify the robust rally in global equities over the past year. The missteps to date have been largely company or industry specific rather than indicative of weakening economic conditions. For example, Alphabet sold off post earnings after flagging higher capex for AI development, and United Health’s stock was weak due to elevated US medical costs.

February will bring more quarterly earnings, with a raft of consumer stocks reporting, which investors will be pouring over for signs of weakening demand. While we are becoming incrementally more cautious on some areas of discretionary spending – travel, apparel – there are few signs, to date, of the recession that many have predicted for 2024.

New Zealand & Australian equities

New Zealand and Australian share markets enjoyed a positive start to the year with the S&P/NZX50 rising +0.9% and the S&P/ASX200 rising +1.2%. After producing very strong returns in December, New Zealand listed property trusts in aggregate fell -0.4%.

There were multiple notable performers within the Australasian portfolio in the month, with the most impressive being Summerset, Infratil and the Australian banks.

Summerset released their fourth quarter operating statistics, including new retirement village unit sales and resales of existing units, which were ahead of analysts' expectations. Summerset has been operating in a challenging environment over the last 12 months with respect to their exposure to the housing market, and in this context the results were well received. Summerset’s share price rose +7.2%.

Infratil rose +5.3% over the month and made an important announcement with respect to their portfolio holding in Canberra Data Centres (CDC). Late last year, Infratil had announced CDC’s intention to materially increase the capacity build to the tune of around 265MWs. In January, they followed this up with the announcement that they had signed contracts for the sale of 110MWs of capacity to new customers, reinforcing that the much talked about demand tailwinds for data centre capacity are alive and well.

The portfolio’s two Australian bank holdings, National Australia Bank and Westpac, enjoyed a strong start to the year rallying +6.2% and +5.6% respectively. There are a number of factors at play here, one of which is that the banks have potentially been much too conservative in their provisioning for bad loans. While the economy is slowing, it is slowing less rapidly than bank expectations. Should the economy continue to exhibit resilience, the reversal of these bad debt provisions will result in increased profits. A second reason is that net interest margins the banks are earning should have been increasing in recent months as their cost of borrowing has declined, while mortgage rates have remained stubbornly high.

On a negative note, one of the smaller retirement village and care operators, Oceania Healthcare, fell -7.9% in January. While there was no news released from the company, there was market speculation that the stock may be removed from a large global share index. The significance of this is that if the speculation proves accurate, it may bring about forced selling of the stock by passive funds that track that particular index.

Top Holdings as of the 31st of January 2024

Generate total Funds Under Management (FUM) as of 31st of January 2024: $4,919,834,337

Returns to the 29th of February 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 equity markets had a strong month in February, gaining 4.3% in USD terms, and 5.3% in NZD terms. A robust earnings season drove most of this strength with three-quarters of large US companies beating their earnings targets for the 4th quarter of 2023. 

There were two standout performers during the month, with each building on their success from 2023. Semiconductor darling Nvidia rose 29% in February after earnings exceeded the market’s high expectations. Wall Street’s estimates for Nvidia’s fiscal year 2025 earnings have now grown 4.1x since March last year, raising the stock price by 3.6x over the same time. Meta Platforms (who owns Facebook, Instagram, and WhatsApp) also performed well, rising 26% in February to deliver a 185% gain over the past twelve months.

Several other holdings also performed well in February. Our investments in luxury car manufacturer Mercedes Benz (+17.9%), construction materials business CRH
(+17.5%) and drug-maker Eli Lilly (+16.9%) all enjoyed strong gains during the month.

Western Alliance (a regional bank based in Phoenix, Arizona) was our worst performer in February, falling -9.2% over the month.  Regional banks were out of favour after New York Community Bank reported poor 4th quarter earnings and Western Alliance was caught up in the negative sentiment. We believe fears about financial contagion are unwarranted, as they were last year, and we continue to believe Western Alliance will build on its long-held track record of delivering value for shareholders.

New Zealand & Australian equities

Amidst a busy reporting season, the New Zealand broad market declined -1.1% as cyclical companies provided relatively weak outlooks. The comparable Australian market fared better, gaining 2.7%.

Our funds largely dodged the worst performers in the market: Fletcher Building, Ryman Healthcare and Kathmandu, which declined -9.3%, -18.6% and -25.7%, respectively. Fletcher
Building shocked the market with multiple disclosures of further impairment charges within the business, earnings downgrades, and the resignation of the Chief Executive and Chairman of the company. This left the market questioning the near-term future of the business as it grapples with major construction losses and litigious claims against its Iplex pipes business in Australia. 

Ryman Healthcare’s shares fell sharply on news that it expects full-year earnings to come in 13% lower than the company had previously guided. The retirement village provider forecast its underlying profit to be between $265 million and $285m in the 12 months ending March, compared with its prior guidance of between $300m and $330m. 

Ahead of releasing their interim results in March, Kathmandu announced a disappointing trading update, which revealed that sales are slowing down across all brands. Pleasingly our funds do not own Fletcher Building or Kathmandu, and only have a small holding in Ryman Healthcare.

While much of the funds' outperformance relative to the benchmark came from avoiding poor performing stocks, two standouts were the investments in Australian banks: Westpac, and National Australia Bank (NAB). Both Westpac and NAB reported their 1Q24 results in February, which demonstrated solid trading updates. Net interest margins, a key measure of bank profitability, were ahead of expectations, while bad and doubtful debts were better than feared. In Westpac’s case, cost control was tracking well, and NAB announced a relatively smooth CEO transition after Ross McEwan had guided the bank back to strength after a difficult period following the Australian Royal Commission.

Lastly, it’s worth pointing out that while Ryman provided a weak trading update, their key large cap peer Summerset demonstrated almost entirely the opposite within their FY23 result. The company reported strong underlying earnings driven by robust resale and new sale gains, albeit partly offset by higher costs. Summerset’s result were underpinned by all-time high resale margins, which was particularly impressive against a weak domestic housing market. Summerset’s share price gained 0.6% over the month.

Top Holdings as of the 29th of February 2024

Generate total Funds Under Management (FUM) as of 29th of February 2024: $5,120,754,427.94

Returns to the 31st of March 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 equities climbed higher in March but there was a marked change in the composition of winners and losers compared to the AI-driven rally of the past 12 months. Europe was the strongest region, Energy was the best performing sector, and Small Caps outperformed Large Caps. Many market pundits have taken this as a sign that the rally is broadening beyond the Magnificent Seven, a healthy sign for the overall market, and this is supported by recent economic data that suggest the global economy, particularly the US, is in better shape than anticipated. The downside to a strong economy could be higher inflation and subsequently higher for longer interest rates, typically a negative for equities. But for the moment at least, markets are taking the renewed inflation threat in their stride.

Our global investments had a mixed month relative to the index as many outperformers over the past year fell victim to profit-taking, particularly in the consumer sector where earnings results failed to meet lofty expectations (Lululemon, Ulta Beauty). On the positive side, gold producer Agnico Eagle Mines rallied +24% after posting earnings and production growth that topped market expectations. Bank holdings such as Western Alliance, JP Morgan and Bank of America all performed well, helped by positive outlook commentaries from management teams at recent financials’ conferences. Alphabet also staged a comeback after enduring a selloff earlier in the year, as the market debated whether the stock will ultimately be an AI winner or loser. 

New Zealand & Australian equities

The local share market enjoyed a solid month of gains. The broad market index, the S&P/NZX 50, was up +3.1%, and the S&P/NZX Real Estate index gained +3.8%. Following the busy reporting season in February, news flow over the month in the local market was limited.

The strongest performer in March was retirement developer and operator, Arvida Group, which rose +14.4%. This was a welcome gain given Arvida’s poor start to the year. In late 2023, Arvida announced it had received a non-binding indicative offer a few months earlier. This saw Arvida’s shares perform strongly into the end of 2023, but as it became less and less likely the bidder would be back with a revised offer, Arvida’s share price slumped. As we approach the financial year end it seems the market is refocusing on the business' fundamentals, which should have improved modestly. 

The Australian Stock Exchange listed property company, Mirvac Group, was also a strong performer, appreciating +10.4%. During the month, a strong set of employment numbers saw the unemployment rate decline from 4.1% to 3.7%. This suggests the Australian economy is unlikely to slip into a recession.

The weakest performing stock was EBOS Group, which is a healthcare distribution company and animal care supplier. Some market participants are speculating that the company may exit the MSCI World Index at the end of May which, if correct, would see a number of large passive funds sell their shares. This has caused early selling pressure from speculators and has driven the share price decline of -7.3% in March.

Top Holdings as of the 29th of February 2024

Generate total Funds Under Management (FUM) as of 31st of March 2024: $5,346,227,383.62