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How fund manager Milford Asset Management grew its business during a recession, partly by ensuring staff had a stake in the business

How fund manager Milford Asset Management grew its business during a recession, partly by ensuring staff had a stake in the business

By Andrew Patterson

Auckland based fund manager Milford Asset Management has a problem that might seem counter intuitive right now.

Despite the ravages of the global financial crisis, or the GFC as it’s become more popularly known, its business, located in the heart of the CBD, is growing faster than its available floor space.

While for many New Zealanders the real face of the financial meltdown has been the collapse of multiple finance companies and more recently the punishments dished out to their former directors, Milford Asset Management has been quietly building its business and its client’s investment portfolios.

In the last decade, funds under management have grown to more than one billion dollars while its Active Growth Fund is up over 60% since it was launched in 2007.

Not a bad result when you consider half the decade has involved probably the most challenging investment climate since the Great Depression, almost a century ago.


Started in 2003 by a group of leading investment professionals who recognised the need for an investment company that could be trusted, Milford Asset Management has worked tirelessly to build its profile in an intensely competitive market and provide a premium service for its clients.

Included in that founding group of professionals is Brian Gaynor, one of the country’s most high profile business commentators, whose opinion and expertise on everything from the performance of individual companies through to the competency of company directors is regularly sought by the media.

In addition, his insightful column in the Weekend Herald is widely read by both mum and dad investors and those working in the finance sector.

Anthony Quirk, the company’s Managing Director, says much of Milford’s success is derived from its structure and its investment philosophy.

“When we started the business we were motivated by a desire to see companies in NZ grow but also to invest in NZ as well. We saw a need for a very good investment manager but we also recognised the environment was improving for savings with the establishment of the NZ Super Fund and the fact that the Government was moving to encourage a greater focus on savings which has seen quite a shift from where we were five years ago.”

“We decided on the name Milford to reflect the fact that we were a NZ company and given the iconic status of Milford Sound it seemed to fit with what we were trying to achieve, though a few Aucklanders sometimes think we’re located in the North Shore suburb with the same name.”


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The growth of Kiwisaver has provided a significant boost for the funds management sector which has allowed it both to expand and be able to plan more effectively for the future knowing that growth over time is now assured.

“Kiwisaver has become a very important part of our business and its also growing rapidly but it still only represents around 10% of our total funds under management. So it’s not a major part of our business right now but certainly it’s an increasingly important aspect of what we offer.”

At the core of the business for any fund manager is the need to provide consistent returns that build wealth for clients but achieving that goal in the current investing environment is a real challenge, given painfully slow economic growth rates globally right now.

Ownership and fees structure

However, retaining clients is based on building a relationship of trust which is fundamentally different to most businesses where the interaction with customers is much less frequent and often more sporadic.
“What we want to achieve is to build the wealth of New Zealanders and to see the wealth of the country grow as a result of our investing performance. In fact, we have a very simple mantra – if our clients do well then we do well as a business.”

“Our key points of difference include the fact that staff ownership is very important for us. We have a strong belief that every staff member, after a qualifying period, should be a shareholder in our business which creates a culture of ownership. We also have an investing philosophy which has served us well where we seek to protect capital in down markets but still achieve good returns for investors.”

“When it comes to fees we have a unique approach where we charge a relatively low all inclusive fund fee, which is capped and then we have a performance fee on top so our success as a company is ultimately reflective of our client’s performance.

Investment strategy

At a time when increased volatility and uncertainty makes clients nervous, delivering on a sound investment strategy is obviously critical for retaining investor funds.

“Our investing approach has changed a lot since the start of the GFC. I recall when our investment committee was meeting in 2007/08 we came to realise that the post-GFC environment and our approach to dealing with it would actually be the making of our business and that’s what’s transpired.”

“What we’re seeing in financial markets is a very long deleveraging cycle [debt being paid down] and we believe we’re going to see that continue for some time yet. If you look at America’s experience after the Great Depression it took almost two decades before people were willing to take on debt again. I’m not sure it will take that long this time around but I think this deleveraging cycle is going to be with us until the end of this decade with countries likely to move through different stages at different times.”

“Fundamentally we attempt to overcome investor nervousness by producing very good returns for our investors which is why people ultimately invest with you. For instance, if you look at our Active Growth Fund it has produced a 10% compound return and its up over 60% since it launched in 2007. We’ve been able to deliver that result despite the fact that it’s been a difficult investment environment which goes to prove there are still great opportunities out there.”

“We saw this in the 1930s as well. Not all companies did badly, in fact there were a great many that did particularly well and actually thrived and obviously it’s our job to identify those companies for the benefit of our clients.”

However, maintaining a consistent investing strategy is easier said than done given the very fluid nature of the macro environment, but Anthony Quirk says Milford adopts a two-step process.

“We spend about half our time monitoring and really understanding the investing landscape we’re operating in and the other half involves taking those key investing themes and finding companies that match up with them. So for example, we were increasingly negative about the global economic outlook in 2007/08 which we identified as a structural decline rather than a cyclical one so we set about identifying companies that would be resilient during tough times.”

“We also identified China as being likely to suffer a significant slowdown this year which would ultimately impact the resources sector in Australia. So we’ve used those themes to flavour our investing decisions over the course of the last few years.


Finding top talent to achieve those returns consistently is one of the biggest challenges faced by fund managers such as Milford Asset Management, particularly when that talent is always in demand.

“Our staff equity arrangement is key to both attracting and retaining top talent. It’s something that a lot of our major competitors don’t offer and for us it’s a very big plus. We’ve certainly been growing our staff resources consistently and as a result we’ve been attracting fantastic talent because as well as the equity arrangement we’re also a business that is growing rapidly as well.”

“In fact when we started the business nine years ago we had about a third of the floor we’re currently on. Now we occupy the whole floor and frankly we’re starting to outgrow our current location.”


“The key for us is to manage that growth and maintain the culture we’ve developed by attracting good people who can add to the business. That’s one of the real benefits of growth. When you’re smaller you have to rely on one or two individuals to drive that growth, but as you grow you can begin to broaden your talent base.”

The key to growth in the funds management sector is based on both retaining and attracting new clients, an aspect of the business where ‘word-of-mouth’ advertising is critical.

“Those that have read Malcolm Gladwell’s book Tipping Point will know that at a certain stage you reach a point where your growth really begins to accelerate because more people are talking about you. Right now we’ve got a lot of very satisfied investors who are telling others about our performance and our goal going forward is to get more of that word of mouth support working for us by ensuring we continue to deliver strong results.

“We’ve also kicked it along with some traditional advertising, but having a high profile person such as Brian Gaynor on our team also helps when you’re a small boutique fund such as ours and you’re not exactly a household name. But without doubt, word-of-mouth is our most effective marketing strategy right now.”

Competing with the banks

So how does a small boutique fund manager compete against the four major banks who are formidable competitors with very deep pockets and integrated IT platforms designed to keep customers money invested with the banks themselves?

“There’s a horses for courses aspect to the competitive landscape. There are some investors who will be attracted to a big brand name for the perceived safety that it offers and I can understand why some people would go down that track. We like to think of ourselves as the ‘thinking persons’ Kiwisaver. The person who is perhaps a bit more sophisticated, who understands that they can get a better return than simply investing in a low risk fund. That’s the market we’ve been actively targeting. In fact the latest Fundsource data shows that we are the fourth fastest growing fund manager in NZ right now behind ASB Bank, Kiwibank and Westpac.”

Milford Asset Management also believes that over time it will give the banks and the rest of its competitors a good run for their money.

“We certainly want to grow to become one of New Zealand’s iconic financial services companies but also to be regarded as a very good manager of other people’s money.”

It’s probably a mantra many of those who had their life savings invested in failed finance companies only wish they had heard a lot earlier.


Sector: Financial Services
Staff: 18
Turnover: not disclosed
Annual growth rate: 150%
Fastest growing markets: KiwiSaver / Unit Trusts
Profitable: yes
Recent highlights: INFINZ Award as Investment Manager of the Year for the third consecutive year. Deloitte Fast50 company (2011)
Ownership: Private (Staff & management 70%, balance owned by external shareholders and former staff)

DISCLOSURE: Andrew Patterson provides professional services to Milford Asset Management as the presenter of the firm’s monthly investor video series for its website.


Milford Asset Management came 39th on 2011 Deloitte Fast 50. The 2012 Deloitte Fast 50 information is here »


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Brian Gaynor's column in the nz herald every saturday is a must read.

His article regarding nzx listed NZS should be a must read for anyone contemplating investing with a ny business involving Craig Norgate AND HIS MATES.

He tells it like it is.

Its just a pity that he is nt a politician


Sounds like a variant of what's known as co-determination, something which NZ Inc unfortunately overlooks most of the time.