Welcome to the December edition of the Generate KiwiSaver Scheme Newsletter. The month of November saw further gains for the Funds on top of the strong returns enjoyed in October. More on this below. Also in November, Generate featured in the media so you can find out some more about your KiwiSaver scheme here.

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. As we are currently in the midst of the silly season we thought we’d share one of Warren’s more light-hearted quotes with you this month:

“What’s the secret of a great marriage? It’s not looks, nor intelligence, nor money — it’s low expectations.”

Light-hearted as it is we suspect there is still some wisdom in it!

Derivatives

A derivative is a security which has its value ‘derived’ from a separate underlying asset.

Its value changes with price fluctuations in the underlying asset. The most common underlying assets include shares, bonds, commodities, currencies, interest rates and market indices.

However, derivatives do not have to be based on financial assets. For example, there are derivatives based on weather data, such as the amount of rain fall over a period of time in a particular region.

The derivative itself is a contract typically between two parties. When the value of the underlying asset goes up one party benefits; when it falls the other party gains.

Derivatives can be used for hedging, or insuring against risk on an asset. For example, at Generate we use foreign exchange forward (derivative) contracts to at least partially hedge our offshore investments from movements in their underlying currencies

Derivatives can also be used for speculation or betting on the future price of an asset.

Derivatives play a large part in financial markets. Last year the Bank for International Settlements calculated the total notional value of derivatives contracts around the world to be an astounding USD710 trillion dollars.

Polar Capital Technology Trust Plc.

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 30 October 2015 PCT managed GBP800 million of Total Net Assets and had returned an average of 12.7% 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