There have been a large number of media and investor comments following the collapse of Ross Asset Management. Many of these show a lack of understanding of the investment management industry.

The following is a list of comments and my response to these: 

“An independent custodian, albeit worthwhile, loads another layer of costs on the actual client investor thereby lowering investment returns”

Custodian fees are often paid by the investment manager, including the PIE funds provided by Milford where the custodian fee is included in a capped annual fee. It is essential to check this before investing because some investment managers charge an additional fee for custodian services. 

“Who were the auditors and what were they doing”?

There was no requirement for Ross to have either his company’s accounts or investors’ accounts audited because he didn’t operate under a PIE (Portfolio Investment Entity) structure. All PIE funds must be audited and copies of their accounts are available on the Companies Office website for inspection. 

“Why are companies with structures the same or similar to Ross Asset Management not automatically audited by the government?”

The Government introduced the PIE regime on October 1, 2007 to give investors better legal protection. Ross Asset Management did not operate under a PIE regime. 

“My lawyer and accountant said Ross Asset Management was all right”

Lawyers and accountants seemed to advise clients on their contracts with Ross Asset Management, not on Ross Asset Management as an investment manager. Lawyers and accountants are generally not in the position to advise on the merits of an investment manager or investment product unless they are Authorised Financial Advisers. 

“If the FMA could not pick Ross up whom will they catch?”

The FMA (Financial Markets Authority) does not have the resources to oversee every incident of investment advice and/or investment manager. There are a number of safeguards, including the use of independent trustees and custodians, audited accounts, publically available performance data, that investors should look for before entrusting their savings with an investment manager. 

“Ross Asset Management did not overcharge its investors”

According to the PricewaterhouseCoopers report, Ross Asset Management received total fees of $19.1 million during the past five years, representing approximately 1% of purported assets under management. However these fees were based on the purported, rather than the actual assets.

Based on the estimated, rather than purported assets under management, Ross Assets Managements fees were probably well in excess of 10%.


Brian Gaynor

Portfolio Manager