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Newsletter June 2015

Welcome to the June Generate KiwiSaver Scheme Newsletter.

We are pleased to announce that we have recently been named the ‘Investment Provider of the Year - 2015’ by the Professional Advisers Association. It is great to see our team’s hard work receive recognition from the industry.

The month of May was one of our best months ever performance wise - so read on to find out more!

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 each 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 seriously running out!

As Generate is now a registered ‘bill payee’ with all the major registered banks topping up via online banking to ensure you get the full $521.43 couldn’t be eaiser!!

Farewell kick-start

As many of you would have heard - the Government announced in the Budget that the $1,000 kick-start that members receive upon first joining KiwiSaver will no longer be offered to people joining up to KiwiSaver after 2pm on the 21st of May. With 2.5 million New Zealanders already in KiwiSaver the Government has spent a total of $2.5 billion on kick-starts.

It was fun while it lasted!

UK Pension Transfers

Due to a change in UK legislation, which came in to effect on April 6, all KiwiSaver providers are no longer able to accept UK Pension transfers – for the time being at least.

Inland Revenue has been holding discussions with its UK counterpart to try to sort the situation out. We will keep you updated as developments come to light.

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:

“I try to buy stock in businesses that are so wonderful that an idiot can run them because sooner or later, one will.” 

Despite the fact that Buffett puts significant emphasis on the quality of the management of prospective companies he is considering buying into, here he explains that the quality of the business itself is of higher importance because over time management teams can come and go.

"Investing 101"

One of the golden rules of investing – if not the golden rule of investing – is “never invest money you cannot afford to lose.”

It is a natural human tendency to want to overreach, by putting more money in than one can afford to lose, and go for the big ‘pay day’. This trait tends to be magnified if one’s financial situation deteriorates because of the hope that hitting the jackpot will make all  problems go away.

The first goal in investing should always be to avoid major losses. Give potential investments the ‘sniff’ test – if it seems too good to be true then it probably is! Also be patient, and seek the advice of qualified, well regarded investment professionals. Finally,ensure the costs of making the investment are reasonable. This recipe may not sound overly exciting, but it is a tried and true formula.

Tuning into mainstream media, it would be easy to think that 2015 has been an unrewarding year for investors. Yet, for the year to date, it has been a considerably better year than 2014. The reason for this “alternative reality” is due to the typical commentator’s blinkered focus on the S&P 500 and Dow Jones Industrial Average in the U.S, which have delivered “only” low single digit returns this year. However, when taking a broader view, year-to-date equity returns have been nothing short of impressive. For example, as at the end of May, European equities are up 13%;  Japanese equities are up 19%; and Chinese equities a remarkable 43%. >>MORE

As mentioned above May saw strong investment returns for the Funds with the Conservative, Growth and Focused Growth Funds returning 0.97%, 3.37% and 4.48% respectively (after fees and before tax). Year to date the Funds have posted returns of 3.36%, 8.10% and 10.03% respectively (after fees and before tax).

The biggest factor contributing to the two growth funds’ performance in May was the falling New Zealand Dollar. This is because large proportions of these Funds are invested in international shares - via our International Equities Managers (IEM’s)..  >>MORE

Top Holdings

Conservative Fund Growth Fund Focused Growth Fund
International Equities Managers
N/A T Rowe Price Global Fund Platinum International Fund
N/A Platinum International Fund T Rowe Price Global Fund
N/A Magellan Global Fund Magellan Global 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 Contact Energy
Contact Energy Arivda Group Arivda Group
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

Templeton Emerging Markets Investment Trust Plc

Templeton Emerging Markets Investment Trust PLC (TEMIT) is an investment company listed on the London and New Zealand Stock Exchanges. It aims to invest in companies based primarily in emerging markets (EM) or deriving a significant amount of revenue from emerging markets, with the aim of delivering capital growth to shareholders over the long-term. When TEMIT was launched in June 1989, it was one of the first dedicated emerging markets funds in the UK to offer access to some of the fastest growing economies around the world – countries such as China and Brazil. Today, over 20 years later, using the same philosophy, it has grown to be the largest emerging market investment trust in the UK, with assets under management of £2.1 billion as at 30 April 2015. TEMIT has offices in 19 countries around the world. The Group includes 52 dedicated EM portfolio managers, analysts and product specialists.

Investors can benefit from lead manager Dr. Mark Mobius, a trailblazer in EM with over 30 years of EM investment experience. As at 30 April 2015 TEMIT had returned 14.3% p.a. over the last 10 years (in local currency).

Next month:  T. Rowe Price Global Equity Fund.