Milford Funds reaps $19 million in annual fees as funds beat performance targets

Thursday 18th July 2013

Milford Funds, a unit of Milford Asset Management that discloses financial statements, more than tripled its fee income, driving up annual profit, as it reaped the benefits of strong investment returns on growing funds under management.

Profit jumped to $7.36 million in the 12 months ended March 31 from $1.05 million a year earlier, as fee income surged 257 percent to $19.02 million, according to financial statements lodged with the Companies Office.

Of that, the base management fee across Milford's funds rose to $5.99 million from $2.89 million a year earlier, and the performance fee, which kicks in when the funds beat a hurdle on returns, soared to $13.03 million from $2.43 million.

Expenses rose to $8.82 million from $3.87 million, with a management services fee payable to parent Milford Asset of $6.97 million the biggest contributor. The parent also pulled out a dividend of $3.6 million.

Milford Asset managing director Anthony Quirk told BusinessDesk the fund manager structured its fees for a low base charge and a higher performance fee to align its interests with its clients, while also bearing other costs associated with managing the investments.

"We've got a very simple business model, if our clients do well, we do well," he said.

Milford Asset's active growth fund made the biggest contribution to the performance fee, and the income fund also did well, Quirk said. The active growth fund made an annual return of 25.3 percent after fees and before tax in the March 31 year, with $476 million under management, and the income fund reported a 19 percent return with $331 million under management.

Since then, the active growth fund has grown to $567 million, with an annual return of 25.4 percent to June 30, and the income fund expanded to $426.5 million for an annual return of 17.8 percent to the end of June.

Milford Asset's funds under management have doubled to more than $2 billion in the past year, and the firm reported the biggest inflow of funds in the first three months of the year with $168 million, according to Fundsource.

Quirk said the firm is "tracking ahead of budget" and has expanded its investment team to nine with a total staff of 28.

The fund manager recently launched a global shares fund and a conservative KiwiSaver fund, which Quirk said covers most bases.

Milford Asset is about 23 percent owned by high-profile fund manager Brian Gaynor. Quirk owns about 11 percent of the business.

BusinessDesk.co.nz

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