Milford fund downgraded
Morningstar says its downgrade of Milford’s Trans-Tasman Fund reflects the fact that Brian Gaynor will have to adopt an unfamiliar strategy to manage its money.
Tuesday, July 21st 2015, 6:00AM
The research house announced last week that it was giving the fund a bronze rating. It had previously been rated silver.
It was put under review in June after portfolio manager Mark Warminger went on extended leave.
Company founder Brian Gaynor took over his role with the fund.
Morningstar senior analyst Kathryn Young said there were a number of factors that affected the new rating.
She said Morningstar's gold, silver and bronze ratings all indicated that it would recommend investors placed their funds with a manager. Whether a fund was rated gold, silver or bronze reflected the level of conviction Morningstar had in its recommendation.
“The downgrade from silver to bronze indicates our conviction that the fund can outpace its peers and relevant benchmarks is somewhat lower but we still recommend that clients invest, we’re just somewhat less convicted.”
She said Morningstar had respect for Gaynor but the strategy he would have to use with the trans-Tasman fund was different to that with which he had been successful in the firm’s active growth fund. “Active growth is quite flexible and absolute-return oriented," Young said.
She said the trans-Tasman fund was more focused on benchmarks and more constrained.
Managing the active growth fund, Gaynor could invest across a wide variety of different classes.
Young said: “The strategy he’s done so well is a little different here. We respect him as a stock picker but want to see how he works in this strategy.”
The fund will be reviewed again in about a year unless there is a significant change, such as if a manager or key staffer leaves.
Young said there was a possibility investors could be spooked by Milford’s recent dealings with the FMA. It reached a $1.5 million settlement over market manipulation claims.
Milford lost several wholesale mandates earlier this month.
But Young said the fact that Gaynor had stepped in to take over Warminger’s role helped assuage some of the fear of outflows, and Milford’s heavy retail focus meant its client base was “stickier” than some managers’.
Milford managing director Anthony Quirk said Morningstar’s report was fair and balanced after a very thorough and professional review process.
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