Funds manager Alliance Bernstein has delivered strong returns for investors since setting up here in 2001 but its own financial performance has suffered during the financial crisis.

The company, half owned by Axa Asia Pacific, has been bleeding cash in New Zealand over the last 18 months its latest accounts show.

In the year to December 2008 the company reported after tax profit of $1.88 million, down from $2.97 million in fiscal 2007.

Total equity declined from $7.99 million to $6.6 million and total assets decreased from $11.54 million to $10.15 million.

A Morningstar report that gave the local managed funds industry a D- grade is no surprise but the analysis was too harsh on taxation standards, the Investment Savings and Insurance Association (ISI) says.

ISI chief executive Vance Arkinstall says tax incentives for long-term savings have been slow coming because the industry has endured “neglect” from policymakers.

“The industry can’t do anything to change that.”

But the new PIE regime with a top tax rate of 30% was a big step forward and has been popular.

New Zealand has finished last in a ranking of the investor-friendly practices - or lack thereof - in 16 countries.

A Morningstar survey of mutual fund investor experiences saw New Zealand score a D-, based on criteria including investor protection, transparency, fees, taxation, and investment choices.

New Zealand was slammed by Morningstar researchers for not forcing mutual funds to provide a full disclosure of portfolio holdings, and for having an ineffectual Securities Commission.

Media commentator and fund manager Brian Gaynor never shies away from having a crack at management fees so it will be interesting what he makes of Morningstar's assessment of his own KiwiSaver fund.

By and large the fund rating agency gave Milford's Aggressive portfolio the thumbs up in a recent assessment, noting that Mr Gaynor has maintained a bearish outlook on markets so the portfolio has been heavily invested in cash (around 70% since launch).

That helped the fund record a one year return of 8.13%, against the NZSX-50 index’s -25% return over the same period.