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Newsletter August 2015


Welcome to the August edition of the Generate KiwiSaver Scheme Newsletter. July was an excellent month for Generate with all three of our funds posting strong returns for our members. In addition a KiwiSaver survey that looked at returns for the year to June 2015 ranked our Growth Fund 1st for performance out of 22 KiwiSaver growth funds and our Focused Growth Fund ranked 1st out of 10 KiwiSaver aggressive growth funds. Both were 1st by a considerable margin. We are very proud of this achievement and it’s pleasing to see our funds start the year to June 2016 strongly. More on this below.

Lunch could be on us!

Book a Generate Adviser for a lunchtime KiwiSaver presentation at your work place during Money Week (31 Aug to 6 Sep) and we will buy lunch for you and your team! Call now as spaces are limited 0800 855 322.

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, and in various interviews he has given, he has shared many of the lessons he has learned during his career. This month we are actually going to share a quote from Charlie Munger, who is Warren Buffett’s – perhaps underappreciated - long time business partner and the Vice Chairman of Berkshire Hathaway:

“The game of investing is one of making better predictions about the future than other people. How are you going to do that? One way is to limit your tries to areas of competence. If you try to predict the future of everything, you attempt too much. You’re going to fail through lack of specialisation.”

We couldn’t agree more with this “stick to your knitting” philosophy. That’s why we structure our investments the way we do. We have in-house expertise in Australasian property, infrastructure and fixed income investing. Hence we manage these investments directly ourselves. When it comes to picking global stocks we acknowledge that we don’t have the expertise of many global fund managers. Therefore, we outsource this part of our growth funds to our International Equities Managers.

"Investing 101"

Time in the market

All investments need to be considered in the context of time. Time is particularly important with more volatile investments such as shares. The more volatile the investment, the greater the time required to ‘ride out’ any possible downturns in the investment’s value and maximise long-term returns.

The locked in nature of KiwiSaver ensures that most people get to benefit from having time in the market. When a member is close to exiting KiwiSaver - such as when nearing retirement - it can often be wise to have one’s investments in a conservative fund as the member doesn’t have the time available to recoup any potential short term losses.


What a difference a month can make! Only a month ago financial markets were transfixed by developments in Greece, and with a ‘Grexit’ looking a very real possibility share markets took a pummelling. Fast forward a month and after an agreement was reached Greece is barely in the headlines - which will come as a relief too many investors who were starting to suffer from ‘Greece fatigue’ (ourselves included!). Given this geopolitical stabilisation share markets in the developed world came steaming back in July with several regaining all of the losses sustained in June. The S&P500, EuroStoxx50 and FTSE100 were up 2.0%, 5.2% and 2.7% respectively. >>MORE


As mentioned above the funds posted strong returns in July. The Conservative, Growth and Focused Growth Funds returned 1.86%, 3.02% and 3.43% respectively (after fees and before tax). Year to date the Funds have posted returns of 5.88%, 12.21% and 14.72% respectively (after fees and before tax).The best performer out of the funds’ property and infrastructure investments in the month of July was aged care provider Summerset Group with a 17.4% return. During the month Summerset reported record half year sales which led to a number of broker upgrades. We have followed this company closely since its listing in late 2011 and are very encouraged by the progress it has made. That is why it remains one of our key property holdings. >>MORE


Top Holdings

Conservative Fund Growth Fund Focused Growth Fund
International Equities Managers
N/A Platinum International Fund Berkshire Hathaway
N/A T Rowe Price Global Equity Fund Platinum International Fund
N/A Magellan Global Fund T Rowe Price Global Fund
N/A Berkshire Hathaway Magellan Global Fund
N/A Polar Capital Technology Trust Polar Capital Technology Trust
Property and Infrastructure
Infratil  Infratil  Infratil 
Ryman Healthcare Ryman Healthcare Ryman Healthcare
Summerset Group Arivda Group Summerset Group
Arvida Group Summerset Group Arvida Group
The NZ Refining Co Metlifecare The NZ Refining Co
Fixed Income and Cash
Term Deposits Term Deposits Cash & Cash Equivalents
Cash & Cash Equivalents Cash & Cash Equivalents N/A
ANZ Perpetual Bonds The Warehouse Jun 2020 Bonds N/A
Contact Energy May Kiwi Property Group 2021 Bonds Kiwi Property Group 2021 Bonds N/A
The Warehouse Jun 2020 Bonds Contact Energy May 2020 Bonds N/A


International Equities Manager Spotlight

The Magellan Global Fund

Magellan Asset Management (‘Magellan’) is a specialist funds management business based in Sydney, Australia.

Magellan manages global equities and global listed infrastructure strategies for high net worth, retail and institutional investors.  The principals, Hamish Douglass and Chris Mackay, are two of Australia’s leading investment professionals. Their long involvement in M&A activity and corporate advisory work has resulted in invaluable experience and expertise in valuing companies, as well as assessing the macro environment and risk management.

The Magellan Global Fund is a quality-focused, long-only unit trust that invests in a concentrated portfolio of global equities. The investment objectives of the Global Fund are to achieve attractive risk-adjusted returns over the medium to long term, while reducing the risk of permanent capital loss.

As of June 30, 2015 the Magellan Global Fund had AUD$7.7 billion in funds under management and a 5 year return of 19.6% p.a. - outperforming its benchmark (MSCI World Net Total Return Index AUD) by 4.3% p.a. Some of its largest holdings were in eBay Inc, Visa Inc, and Yum! Brands.

Next month: Platinum International Brands Fund