(Pictured: Brian Gaynor) 

Research houses are holding fire on Milford Asset Management following the New Zealand Superannuation Fund (NZS) decision to suspend its local equities mandate early this month.

In the wake of the NZS move, which saw it temporarily re-house the NZ$281 million Milford mandate internally, Australian-based researcher Morningstar said its ratings of the manager would remain as is “pending the conclusion of the investigation”.

The Financial Markets Authority (FMA) said on April 2 it would complete the “final investigation [into alleged market manipulation by Milford] steps in the next few weeks”.

According to the Morningstar website, the Milford retail funds range in ranking from three to five stars with a few products yet to be rated.

Meanwhile, NZ asset consultant Melville Jessup Weaver (MJW) also told institutional clients last week it would reserve judgment on Milford until the regulatory inquiry is finalised.

“While there has been some speculation as to the issues we do not know at this stage what investment fund is the subject of the investigation and which individual(s) might be under investigation,” the MJW note said. “MJW recently completed a manager research visit to Milford in regard to their NZ equity fund and we reaffirmed our view that we rate them highly in this sector. We also like the total Milford operation.  

“However we will need to revisit this view once we know more about the results of the FMA investigation.” 

In a research note headed ‘Regarding the FMA’s investigation of Milford’, Kathryn Young, Morningstar analyst, said regulator probes “though rather common, have never before been public information”.

“Given the frequency of FMA investigations, there is little information we can reliably draw from the fact of its existence or its duration,” Young said.

She said Morningstar has had “numerous conversations” with Milford since the regulator’s investigation became public but neither the manager nor the FMA were able to shed much light on the matter.

“We will re-evaluate that position when the outcome is released and share any changes to our view with you as quickly as possible,” Young said. “We are monitoring the situation closely, not only as it pertains to the ratings we publish on Milford strategies but also for its importance to the New Zealand market overall.”

– David Chaplin, publisher of Investment News NZ