Super Fund eyeing Milford FMA probe

Anthony Quirk, managing director of Milford Asset Management, shown in 2009. Photo / Brett Phibbs

The New Zealand Superannuation Fund says it will keep a close eye on the outcome of a regulatory investigation into Milford Asset Management.

Milford manages investments on behalf of the $27.5 billion Super Fund through an active equities mandate it has held since 2009, which was valued at $253 million at the end of June last year.

The Auckland-based fund manager - which has more than $3 billion under management, including KiwiSaver funds - yesterday ended widespread industry speculation about a market manipulation probe when it confirmed a trader employed by the firm was being investigated by the Financial Markets Authority over "certain specific trades".

The investigation followed a referral from sharemarket operator NZX.

A spokeswoman for the Super Fund said the fund had not been contacted by the FMA in relation to the Milford investigation.

"We will be watching the outcome of the investigation closely," she said.

News of the probe comes as the Super Fund searches for a external fund manager to take over the $260 million active equities mandate previously managed by AMP.

AMP's mandate was terminated in November as the Australasian financial services provider made sweeping changes to its New Zealand funds management business.

Auckland's Devon Funds Management also has an equities management mandate with the Super Fund.

In a statement yesterday, Milford managing director Anthony Quirk said the company and the trader concerned were "co-operating fully with the FMA".

Quirk said the investigation did not have implications for client funds and had no impact on day-to-day operations at the company.

It is understood confidentiality agreements with the FMA prevent the firm making any further comment.

Market manipulation involves deliberate attempts to interfere with the market to create artificial, false or misleading appearances in supply, demand or the price of securities.

It has been a key focus of the FMA since the regulator was set up in 2011, when it replaced the Securities Commission, which was widely viewed as ineffective.

Under the Financial Markets Conduct Act, an individual convicted of market manipulation can be jailed or fined up to $500,000, while a company can face a fine of up to $2.5 million.