Facebook icon Forward icon

Newsletter May 2015

Welcome to the May Generate KiwiSaver Scheme Newsletter. During April the Funds had their 2 year anniversary. In the 2 years to the end of April the Conservative, Growth and Focused Growth Funds have provided a total return of 10.8%, 20.7% and 24.0% respectively (after fees and before tax).

Get the most out of KiwiSaver

Have you got your $521 Member Tax Credit from the Government?

If you are over 18 and mainly reside in New Zealand then your KiwiSaver account is entitled to $521.43 from the Government - as long as you have contributed $1,042.86 or more to your KiwiSaver account in the year to 30 June. If you haven’t done this already then it’s time get a move on as time is running out and this is the only investment we are aware of that guarantees a 50% return on your money!

Warren Buffett Wisdoms

After 50 years at the helm of Berkshire Hathaway (which is currently 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 he has shared many of the lessons he has learned during his career. This month:

“Cash… is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent.”

Here Warren talks about the importance of cashflow to companies and hence why Berkshire Hathaway likes to hold billions of dollars of cash on its balance sheet. In the past Buffet has employed his hoard of cash several times by buying into good companies that are in temporary distress because they have not been as diligent with their cashflow.

"Investing 101"

Risk versus Return – the Trade Off

The link between risk and return is the most fundamental rule of investing. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns.

Because of the risk-return trade off, you should be aware of your personal risk tolerance when making investments.

The goal is to find an appropriate balance - one that generates a satisfactory return in the medium to long term, but still allows you to sleep at night!

April was a mixed bag for global equities (share markets), with a weaker tone emerging towards the end of the month. Investors remain uncertain about the prospects for global growth given recent disappointing GDP reports in the US, UK and China.

In China central bank largesse, together with optimism around the reforms being implemented, helped push the China Stock Exchange Composite Index up an astonishing 18.5% in April. Year to date the Index is up 37.3%. Generate’s two growth funds have participated in some of this strong performance as we started increasing our exposure to China in the latter stages of last year primarily via the Platinum International Fund. >>MORE

In April the Conservative, Growth and Focused Growth Funds returned 0.39%, 0.53% and 0.71% respectively (after fees and before tax).

The best performer in the month of March out of the funds’ property and infrastructure investments was Australian based toll road operator Transurban with a 5.9% return (in NZD). The company reported 11% like for like revenue growth in the March quarter which led to a number of broker upgrades. The NZD/AUD also provided a tail-wind over the month.  >>MORE

Top Holdings

Conservative Fund Growth Fund Focused Growth Fund
International Equities Managers
N/A T Rowe Price Global Fund T Rowe Price Global Fund
N/A Platinum International Fund Magellan Global Fund
N/A Magellan Global Fund Platinum International Fund
N/A Berkshire Hathaway Berkshire Hathaway
N/A Worldwide Healthcare Trust Worldwide Healthcare Trust
Property and Infrastructure
Infratil  Infratil  Infratil 
Ryman Healthcare Ryman Healthcare Ryman Healthcare
Summerset Group Summerset Group Summerset Group
Arivda Group Metlifecare Arivda Group
Contact Energy Arivda Group Contact Energy
Fixed Income and Cash
Term Deposits Term Deposits Cash & Cash Equivalents
ANZ Perpetual Bonds Cash & Cash Equivalents N/A
Cash & Cash Equivalents Precinct Properties Dec 2021 Bonds N/A
Fonterra Capital Notes Kiwi Property Group 2021 Bonds  N/A
Precinct Properties Dec 2021 Bonds Trustpower Dec 2021 Bonds N/A


International Equities Manager Spotlight

Jupiter European Opportunities Trust Plc

Founded in 1985 as a specialist boutique, Jupiter Asset Management has become one of the UK’s most respected and successful fund management groups.

Jupiter European Opportunities Trust Plc's (JEO’s) objective is to invest in securities of European companies and in sectors or geographical areas which are considered to offer good prospects for capital growth. The company adopts a stock picking approach in the belief that a thorough analysis and understanding of a company is the best way to identify long-term superior growth prospects. Alexander Darwall has been JEO’s Portfolio Manager for over 15 years and has delivered stellar performance over this time period.

As of 13 May 2015 the company had net assets of GBP543 million and had returned 22.7% p.a over the last 5 years versus 8.1% p.a. for its benchmark (MSCI AC EUROPE).

Next month:  Templeton Emerging Markets Investment Trust.