
Research house Morningstar has taken the Milford Trans-Tasman Fund off review, reinstating it as a three-star, bronze-medaling product.
Morningstar put the Milford product ‘under review’ late in June after the mysterious departure of portfolio manager, Mark Warminger, and his replacement in the NZ shares component of the fund by Brian Gaynor, the company’s founder and chairman.
Warminger was removed from portfolio duties at the same time as Milford signed a settlement with the Financial Markets Authority (FMA) in regards to alleged market manipulation charges.
While the post-Warminger Morningstar report, authored by analyst, Elliot Smith, says the recent upheavals “quell our conviction”, the researcher remains positively-disposed to the Milford product process.
“Recent personnel changes and instability within the leadership of Milford Trans-Tasman has dampened our view, however, we continue to believe it is an above-average way to access Australasian equities,” the Morningstar report says.
According to the Morningstar analysis, Gaynor is likely to change the style of the Trans-Tasman fund but the researcher rated his proven “stock-picking ability” and business insight as positives.
“Investors should expect lower turnover in the NZ portfolio under Gaynor’s watch,” Morningstar says. “He takes a stringent long-term view with his investing, whereas in the past, Warminger had been more opportunistic, often investing with a shorter-term horizon.”
The researcher gave the Milford Trans-Tasman product three-stars and a bronze medal.
Morningstar uses a dual rating system, awarding stars (up to five) for quantitative aspects and medals (also ranging across five factors from ‘negative’ to ‘gold’) for qualitative features.
The research report also shows the fund has suffered net outflows of $11.5 million during the 2015 calendar year to date with funds under management currently sitting at just over $280 million.
While retail investors have remained relatively sanguine about the FMA investigation and subsequent changes, Milford admitted earlier this month it had lost several wholesale mandates totalling about $130 million since the news broke, including a roughly $120 million contract with Mercer.
The manager is also awaiting news on the fate of its New Zealand Superannuation Fund (NZS) mandate, which was valued at $281 million when Milford was suspended from the portfolio in April.