Generate has carved out two in-house equities strategies as stand-alone funds, bringing the group’s non-KiwiSaver product suite to five.
The launch of the Australasian equities and Thematic global shares funds, both carrying a 1.29 per cent sticker price, marks a departure for the $4 billion plus Auckland boutique that has to date marketed only diversified offerings.
While the Australasian shares fund – managed by Andrew Bolland and Dan Frost – has a five-year track history inside Generate, the newly created thematic vehicle transplants a strategy pioneered by portfolio manager, Nathan Field, at his previous shop, Kiwi Wealth.
Field officially departed Kiwi Wealth earlier this year ahead of an investment team shake-up by new owner, Fisher Funds, after confirming the move to Generate last December.
As reported in May, Generate now manages most of its global equities in-house with several third-party firms – including a new allocation to the Nicholas Bagnall-run Te Ahumairangi fund – making up the difference.
The Generate thematic portfolio currently sits about $750 million, Field said, versus the peak of almost $2 billion he managed at Kiwi Wealth (where the strategy is likely to be submerged in the Fisher world).
He said the overall approach is largely the same, where a number of themes (currently eight) flow through to a concentrated portfolio of global equities, but with a few stylistic differences.
“For example, I have 54 companies in the Generate portfolio compared to over 100 at Kiwi Wealth,” Field said. “I think 54 stocks is ample diversification.”
The Generate thematic fund also features a slight benchmark shift, measured against the MSCI World rather than the previous MSCI All Countries index.
Nonetheless, he said the process of converting high-level themes – such as healthcare, energy transition, post-pandemic spending and industrial consolidation – through fundamental analysis into relevant stock selection remains in situ.
“The strategy focuses on finding companies that can monetise the trends we have identified,” Field said.
Despite the growing hype around artificial intelligence (AI), for instance, he said that picking profit-makers from the latest IT arms race is difficult.
“In AI there is only one clear winner at the moment and that’s Nvidia, which supplies 95 per cent of the chips businesses need to implement the technology,” Field said.
The fund did hold Nvidia prior to the AI-generated bounce earlier this year, he said, which contributed to its recent quarterly performance of about 3 per cent above benchmark but the strategy is based on themes playing out over the longer term.
“Ideally, we refresh the themes each year but we don’t change them that often,” Field said.
The new Generate Australasian equities and thematic global share funds are only available as stand-alone options outside the firm’s KiwiSaver scheme (although the portfolios are part of the diversified investments).
Generate replicated its flagship KiwiSaver Focused Growth fund as a broader retail unit trust in 2019, adding balanced and conservative products last year.
However, since inception the non-KiwiSaver Generate Focused Growth fund has raised just over $20.4 million while the balanced and conservative strategies hold less than $1 million in total.
By contrast, the Generate KiwiSaver scheme recently kicked through $4 billion.