Milford’s Active Growth Fund reports a five-year return of 9.8% a year and 10-year return of 12.4%.

But adviser Rachelle Bland has taken issue with that because, until the first quarter of 2017, the Milford Active Growth Fund was classified as an Australasian equity fund, with 62.2% in NZ domiciled assets and 21% in Australia.

“Then, in Q2 2017, it was re-classified as a ‘growth’ fund, with 46.3% in NZ domiciled assets and 74.7% in growth assets. And after a single quarter of being classified as a growth fund, [Morningstar] report the fund as ranking for first place for three and five years. This is a blatant falsehood. The fund had only met the growth fund criteria for three months.”

She said, if a fund changed its investment mandate or made significant asset allocation changes, the returns quoted in reports should start from the date at which a fund met the criteria for a new category.

“It is disingenuous to include a fund’s prior earnings when it had a completely different investment mandate and investment allocation.”

She wrote to Morningstar: “You may doubt the significance of this issue, however in New Zealand there are little or no restrictions on Managed Investment Service licensees advertising based on past performance and Milford are currently running extensive media advertisements as being ‘Morningstar’s top ranking growth fund for ten years’, which is technically right, however puts the validity of your research into question.”

Tim Murphy, Morningstar’s director of manager research, questioned the suggestion that reclassification in 2017 was recent.

Murray Harris, head of wealth management at Milford, said while the fund had previously been categorised as an Australasian equities fund, it had always met the growth fund criteria in terms of its growth-to-income assets split, but had been classified in the Australasian specialty category because of Brian Gaynor's focus on local investments.

But as it became more diversified, with more global investments, it had moved out of the specialist category.

“It has always had a 75/25 or 80/20 growth to income mix. It has always met the KiwiSaver growth allocation.”