Welcome to the July edition of the Generate KiwiSaver Scheme Newsletter.

Member Tax Credits (MTC’s) – This years’ $521!

The IRD has begun making payments for members’ MTC’s. You will receive $0.50c for every dollar you have put in during the year to June 30, up to $521.43*. Most payments have already been made although some can take up to two months. You should see your MTC’s in your account soon!

*Conditions apply. See our Investment Statement for more details.

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, and in various interviews he has given, he has shared many of the lessons he has learned during his career. This month:

“Be fearful when others are greedy, and greedy when others are fearful.”

Buffett often talks about investor psychology and how from time time investors gets irrationally bullish (optimistic) or irrationally bearish (pessimistic) about the outlook for share markets. By keeping a cool head he has taken advantage of ‘herd mentality’ several times during his career. He has done this by maintaining investment discipline and basing his decions on facts whilst ignoring market “noise”. An example of this was Buffett’s refusal to buy in to the internet boom of the late 90’s. Whilst tech company share prices were rocketing higher he was under a lot pressure to partake in the ongoing boom and was labelled as being ‘out of touch’ by many in the market. He steadfastly refused to buy tech stocks on the basis that valuations were extremely high and instead maintained his focus on solid companies that consistently grew their earnings. When the internet bubble finally popped in March 2000 tech stock prices plunged and Buffett’s investing philosophy was proven to be right yet again.

Albert Einstein famously said “Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it.”

Compounding returns offer one of the most powerful ways to build wealth. It means earning returns on re-invested returns. Over time, the more  returns you reinvest, the more money you have working for you, and the more you can earn. KiwiSaver funds offer a good way to capture compound returns as all of a member’s returns are re-invested into the member’s account.

T. Rowe Price Global Equity Fund

Founded in Baltimore in 1937, T. Rowe Price has grown in to one of the world’s largest fund managers with more than USD$750 billion in funds under management. The company focuses exclusively on investment management; and the company’s key mantra is “if you take care of your clients, your clients will take care of you.”

The T. Rowe Price Global Equity Fund is run by Scott Berg. We had the pleasure of hosting Scott at a function in late 2013 where he described to us how he has the ability to tap into 130 Equity Research Professionals, 9 Sector Portfolio Managers and 57 Regional and Diversified Portfolio Managers to assist him with his investment selection.

He took over the management of the Global Equity Fund in June 2012. As of May 30, 2015 it had funds under management of AUD$1.2 billion and a 3 year AUD annualised return of 26.4% p.a. (net of fees). Some of its largest holdings are in Amazon, Boeing, and Google.

A key differentiator of the Global Equity Fund is its ‘truly global’ nature with investments in approximately 30 countries. This compares with the average of its peer funds of only 18 countries.

Next month:  The Magellan Global 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.