Boom year for Milford Funds as funds generate more performance fees, inflows rise
Milford Funds , the public issuer of Milford Asset Management's retail funds, reported a 79 percent jump in annual fee revenue reflecting an inflow of money from investors and increase performance fees.
Fee revenue climbed to $34 million in the 12 months ended March 31, from $19 million a year earlier, according to its financial statements. Its management fee component soared 157 percent to $15.4 million and the performance fee rose climbed 45 percent to about $18.9 million. Fund management fees are capped at between 0.65 percent and 1.35 percent, while performance fees range from 10 percent to 15 percent of any gains above a fund's investment target.
Milford Funds had a net profit of $10.5 million, after paying a management services fee to its parent that more than doubled to $15.2 million. Funds under management rose by 55 percent to $3.1 billion in 2014 and have tripled in the past two years.
Increased returns were led by the Milford Active Growth Fund, which is managed by executive director Brian Gaynor and returned 19.8 percent in the March year, outpacing a 16 percent return for the NZX 50 Index. The firm's balanced fund returned about 12 percent in the year, while the conservative fund returned 13 percent.
Gaynor is the largest shareholder in Milford Asset Management, directly owning about 22 percent of the stock. Managing director Anthony Quirk is second-biggest with about 11 percent.
"It has been a very strong growth period for us and we've retained existing clients as well," Quirk said. "It allows us to invest back into the business, we've increased our investment team to 12 including the Sydney office."
Quirk said the Sydney office, which opened in February, is "purely investment focussed" for now and puts its analysts closer to the about $700 million of FUM invested in Australian companies. Down the track, Milford may consider selling and distributing products in Australia, he said.
Returns so far in the 2015 year have been more mixed and unlikely to see a repeat of the 2014 performance, Quirk said. The firm is pleased the election delivered a clear outcome and is "reasonably positive" about the New Zealand market, although "you would not say it's cheap."
But offshore factors are likely to weigh in coming months including the potential for a slowdown in China's economy and to a lesser extent Europe, and the prospect of higher interest rates.