Returns to 31 August 2016 (after fees and before tax).

Note: Past performance is not necessarily an indicator of future performance and return periods may differ.

August was a very busy month for your KiwiSaver scheme. We laid the groundwork for three major projects which all went live in early September:

• We have released our new Product Disclosure Statement.
• We have launched a new member website with more features and an easy to use intuitive interface on both your phone and computer. Along with seeing your balance and transactions you can now see a breakdown of what you are invested in.
• We transitioned our administration services from Aon to market leader MMC. We believe this will improve the level of service we can offer our members.

Markets-wise August was a much quieter month relative to the preceding few months. More on this later.

After 50 years at the helm of Berkshire Hathaway (which is typically one of our largest investments for both of our growth funds) Warren Buffett has become widely regarded as the world’s greatest investor. In his annual letters to shareholders, and in various interviews he has given, he has shared many of the lessons he has learned during his career. This month:

“It must be noted that your Chairman, always a quick study, required only 20 years to recognize how important it was to buy good businesses.  In the interim, I searched for "bargains" - and had the misfortune to find some.  My punishment was an education in the economics of short-line farm implement manufacturers, third-place department stores, and New England textile manufacturers.”

Here Buffett pokes fun at himself for how long it took him to realise that all along he should have been looking to buy into great companies at a fair price rather than fair companies at a great price. Buffett thanks his right hand man – Charlie Munger – for helping him ‘see the light’ and change his investment philosophy.

Geared investments can increase gains AND losses

A ‘geared’ investment is another way of saying that the amount invested has been ratcheted up by getting a loan. The word 'gearing' can be understood in a similar way to how gears work on a bike — whereby a small effort on the pedal turns into a bigger physical force on the wheel.

Borrowing money will increase the amount you can have invested, and naturally amplifies potential gains as there is more of a capital base on which to earn returns. The flip side of this, of course, is that it can also magnify losses.

Geared investors often become forced sellers in a declining market when the level of equity in their investment falls below a certain level. Unless they can inject fresh equity they have to sell their investment, which then crystallises the loss.

Polar Capital Technology Trust

Polar Capital Technology Trust Plc (PCT) provides investors with access to the potential of companies in the global technology sector.
Managed by a team of dedicated technology specialists, PCT has grown to become a leading European investor with a multi-cycle track record.

PCT believes that “we’re in the midst of a new technology cycle, driven by cloud computing, internet applications and mobility.” The Trust seeks to capitalise on such cycles, by gaining exposure to exciting emerging themes and harnessing potential returns through investing in companies believed to have the highest growth potential from across the global technology spectrum.

As at 31 July 2016 PCT managed GBP1.01 billion of Total Net Assets and had returned an average of 16.0% p.a over the last 5 years (in local currency).

Next month: Platinum International Fund

If you have any questions after reading your newsletter, give us a call on 0800 855 322 or email us at info@generatekiwisaver.co.nz and we would be more than happy to help.

We thank you for your support.

Kind regards,

The Generate Team