Milford Funds profit plummets 71 percent

  • 07/09/2016
Milford Funds profit plummets 71 percent

Milford Funds, the public issuer of Milford Asset Management's retail funds, posted a 71 percent decline in annual profit as the fund manager hired workers and incurred costs to introduce new processes in response to regulatory requirements.

Net profit fell to $4.4 million in the year ended March 31 from $15.1m a year earlier, the Auckland-based company's financial statements show.

A 47 percent increase in the management services fees to $26.4m for the unit's parent, Milford Asset, was the biggest drag on earnings as the fund manager added staff and introduced the Charles River-hosted trading system to meet new licensing requirements of the Financial Markets Conduct Act (FMC).

"It's part of the regulatory environment - we needed to move and we have," acting chief executive Bryce Marsden said. "Longer term it will be good, but in the near-term, the next year or so, there will be teething problems and growing pains."

Milford Funds' fees fell 14 percent in the 2016 year to $38.5m due to the fund manager reaping a smaller performance bonus for exceeding its benchmark. Base management fees were up 22 percent to $29.6m, while the performance component more than halved to $8.9m.

"The funds still performed, they got a performance fee generated so that means our clients continued to do well," Marsden said.

Milford's diversified income fund generated a return after fees and before tax of 9.6 percent in the year ended March 31 compared to 17 percent in 2015, while the active growth fund, managed by executive director Brian Gaynor, posted a return of 8.5 percent in 2016, down from 12 percent a year earlier.

Marsden said now the regulatory projects have been completed Milford will start looking at its product mix and see what it can do to grow the business.