High-flying New Zealand boutique fund manager, Milford Asset Management, is set to crash through the $3 billion barrier within a month or two.
Milford, headed by regular NZ Herald columnist, Brian Gaynor, has experienced stellar growth over the last few years with funds under management (FUM) increasing five-fold since 2010. Even two years ago Milford's FUM sat at just $1 billion, which is big in NZ terms but hardly unprecedented.
If the current growth rate persists, Milford may soon be snapping at the heels of the country's largest locally-owned investment shop, Fisher Funds, which boasts of FUM in excess of $5 billion. However, Fisher reached the $5 billion mark largely via a series of acquisitions, with the latest, its purchase of Tower Asset Management in April last year, adding more than $3.5 billion in FUM.
By contrast, Milford has followed an "organic" growth path, according to the firm's managing director, Anthony Quirk. While Milford does have wholesale clients, including a $2-300 million mandate with the New Zealand Superannuation Fund, it has found greater success in the retail market where margins are higher and money sticks around longer.
Against industry trend, too, most of Milford's growth has come from outside KiwiSaver.
Quirk reckons the Milford KiwiSaver scheme represents about 10 per cent of its FUM, with the remaining retail money coming direct or via financial advisers.
Milford's local competitors may look on enviously (ok, they do look on enviously) but such rapid growth also brings its own problems in a market the size of New Zealand.
As a rule of thumb, it becomes more difficult to be a nimble, under-the-radar NZ equities manager with more than $1 billion in FUM, which is why the definition of New Zealand also includes Australia for most local firms.
But at $3 billion even Australasia might not be big enough. Last year, for instance, Milford stepped outside its specialist domain with the launch of a global shares fund. According to research house Morningstar, the Milford global fund has raised about $120 million.
Quirk says Milford is also hoping to attract Australian clients. The company set up an office with three staff in Sydney earlier this year, initially to manage the $600 million or so of Australian shares currently housed in Milford portfolios.
"We're looking to get distribution in Australia long-term," Quirk says. "Although, we realise you can't treat it as the same as the New Zealand market."
Most likely Milford will be aiming to tap into the almost A$2 trillion superannuation pool, where managing $3 billion is considered entry-level.