What's gone wrong for Milford's Active Growth Fund?

Milford's Active Growth Fund, once a shining star in KiwiSaver, has recently encountered setbacks. Despite its continued top performance over a decade, with a ten-year return of 10.2 percent, it recently slipped to the bottom among growth funds over the past three months, yielding just 5 percent compared to the best performer's 12.5 percent.

This decline was also evident in one-year and three-year periods, with the fund returning 7.8 percent and 28th place respectively, compared to the leading fund's 21.5 percent. Morningstar associate director Steven Le attributed Milford's shift to a more defensive stance, reducing exposure to technology and the US markets, which have recently been strong performers.

However, Le affirmed Milford's strong management, citing its robust research, comprehensive coverage, and boots on the ground in key regions. Concerns have emerged about the fund's size growth, with New Zealand equities exposure more than halving since 2020. Le noted this trend is expected to persist as Milford manages capacity in smaller local markets.

While Milford remains a dominant player in the New Zealand market, its expansion into new segments, like global equities, poses risks. The firm has been monitoring this area closely, and though no material issues have been identified, it remains a focus. Milford's wide mandate allows it to adjust its growth to income asset split at will, with equity exposure dropping to 60 percent in December 2022 from 76.3 percent in November 2025.

Despite potential returns dip, reduced US equity exposure proved advantageous in April of the previous year when the fund outperformed the index by 0.1 percent following a 1.6 percent drop. Milford has announced its intention to stick with its strategy aiming for 10 percent annual returns over seven years. In response, advisers were informed they should be open, accessible, and transparent about the fund's performance, decisions, and positioning.