Generate lifts profits as other managers report falling profits

The tale of two managers.

Wednesday, August 2nd 2023, 7:55AM

by Jenny Ruth

The year ended March 31 has been a lean year for most fund managers, with the noteable exception of Generate Investment Management.

While most fund managers are reporting falling profits, Generate lifted its annual net profit 4.4% to $3.4 million with management fees jumping 20.8% and overall fee revenue up 6.6% to $44.4 million.

According to Morningstar, Generate, which cut its fees slightly in May last year and which doesn't charge performance fees, was the ninth largest KiwiSaver manager at March 31 with funds under management of $3.75 billion, up by $463.7 million from a year earlier.

Much if not all of that growth came from increasing contributions by its KiwiSaver members since most of its funds delivered negative returns in the year.

Its largest fund, the aggressive Focused Growth Fund with assets of $1.84 billion at March 31, ranked sixth out of 12 funds in Morningstar's latest survey with a negative 3.7% return for the latest year and fifth out of nine funds over five years with a positive 6.5% annual return.

Its other major fund, its Growth Fund, ranked seventh out of 26 funds with a negative 2.8% return for the latest year and seventh out of 16 funds over five years with a positive 6.5% return.

Generate's operating expenses were up 7% to $39.7 million in the latest year.

Generate reported to the Financial Markets Authority, as required under the Financial Markets Conduct Act, that its net tangible assets at March 31 were negative $527,899, up from negative $263,233 a year earlier.

Generate paid its shareholders $2.3 million in dividends during the year after paying no dividends the previous year.

Poor profits for Fisher

By contrast, Fisher Funds Management reported a 72.7% drop in annual net profit to $25.7 million with fee income falling 32.4% to $134.8 million while expenses jumped 45.2% to $81.8 million, including $7.1 million in acquisition costs.

The bottom line included a net loss of $12 million from Kiwi Wealth from Nov 30 to March 31.

Fisher, which bought Kiwi Wealth last year for $310 million, said in April that it was removing performance fees from all its KiwiSaver and other funds.

Fisher's performance fees had been particularly controversial because the firm used the 90-day bank bill rate as its benchmark, despite it being a specialist investor in equities.

The company collected no performance fees in the latest year after booking $77.2 million the previous year.

Fisher is the fourth largest KiwiSaver manager with $7.69 billion in funds under management while Kiwi Wealth is fifth largest with $6.73 billion.

Morningstar ranked Fisher's largest KiwiSaver fund, its $3.12 billion growth fund, 16th out of 26 in the latest year with a negative 4.1% return but it was fifth out of 16 funds over five years with a 6.6% annual return.

Fisher confirmed earlier this year that its international portfolio had lost $50 million from its investment in US-based Signature Bank, which collapsed in March.

Fisher paid its owners $29.3 million in dividends in the latest year, down from $85 million last year – it raised $335.3 million in fresh capital during the year to pay for the Kiwi Wealth acquisition.

This story has been corrected to show the actual ranking of the Generate funds' returns over one year.

Tags: Generate