Milford Asset Management portfolio manager Mark Warminger was "unlikely" to get a positive performance review because of the seriousness of the Financial Markets Authority inquiry into his suspected market manipulation, said the firm's head of investments Brian Gaynor.

Gaynor is giving evidence in the market manipulation trial in the High Court at Auckland brought by the FMA against Warminger, who is accused of breaching securities law and giving a false and misleading appearance in the market in relation to 10 trades in 2014.

Warminger had five equity funds for wholesale clients under his management with a total $670 million in funds, of which around half related to a mandate from the New Zealand Superannuation Fund.

The experienced portfolio manager had been employed at Milford since 2011 and was the company's biggest share trader because of the type and number of funds he managed compared to the other seven portfolio managers at the time, Gaynor said. Warminger was responsible for 32.6 per cent of Milford's total 15,270 trades that year and for 99.1 per cent of its direct market access trade available through two brokers where he traded directly himself.


Gaynor said he thought salaries at Milford in 2014 were below the market but it offered a bonus based on the overall performance of the company adjusted for individual performance.

Warminger's performance was rated twice yearly but Gaynor and then chief executive Anthony Quirk conducted a performance review with him in August following concerns about the funds under his management not meeting the required benchmarks for the previous six months.

Gaynor said he wasn't concerned about the underperformance because he felt the underlying investments were sound.

He said management had other concerns about Warminger including his "mood not being as positive as it had been". Warminger is said to have had some personal issues at the time as his parents-in-law had come to New Zealand to live with him.

Warminger had also failed to tell Gaynor that he had personally done some trading in Wynyard Group and Restaurant Brands NZ on behalf of Gaynor's funds, now the subject of the market manipulation trial.

Gaynor said his concern was not about the dealings but around the communication over them.

Warminger ended up being given a negative performance review after the FMA launched its inquiry and Gaynor said there was no way he wouldn't because "otherwise we would not have been seen as taking the FMA investigation seriously".

"That was based on the FMA's allegations which had exposed Milford to unacceptable risk," he said.

Warminger was stopped from trading in December 2014 following a further letter from the FMA but continued to manage his portfolios until June 2015 when he was put on extended leave. He remains a minor shareholder in the firm.

Milford has since moved to a centralised trading desk separate to its portfolio managers though Gaynor said in 2014 it wasn't of a size and scale to afford one.

It paid a $1.5m fine under an agreement with the FMA following a year-long investigation and also committed to introducing new governance and trading controls. Gaynor said its compliance team now has four people rather than only one in 2014 and reviews daily trades made by the firm.

The New Zealand sharemarket was unusual compared to others around the world, he said, because a high proportion - 65 per cent and 70 per cent daily - of trades are done by off-market negotiation rather than electronically. In yesterday's trading, for example, there was $127m of trades of which 68 per cent were done off market, he said.

"The way I look at it the bigger the player, the bigger the influence they have on the overall prices and the off-market is more dominant. I would pay more attention to what the off-market prices were than on-market."