A leading New Zealand asset manager is reviewing its stake in Slater and Gordon amid growing concerns about the law firm's UK business and regulatory reviews.
Milford Asset Management said it was reviewing its investments in the law firm in light of the revelations.
"We have a portfolio of over 100 stocks and some are more high risk than others," executive director Brian Gaynor said on Tuesday.
"Slater and Gordon is higher risk and we've done very well to date out of it but there will always be winners and losers."
The law firm's investors have been shocked by news that it made mistakes in the reporting of cash receipts from its UK business going back to the 2011/12 financial year.
Meanwhile, UK authorities are probing the accounts of insurance technology group Quindell, which Slater and Gordon recently bought a slice of for $1.2 billion.
The Australian corporate watchdog is also carrying out a routine review of the law firm's auditor, Pitcher Partners.
Mr Gaynor said it was difficult to know exactly what was going on with the investigations because regulators don't provide full information on their inquiries.
"We're still pretty confident that this is something the company will get over but we don't really know yet," he said.
Milford has three funds invested in Slater and Gordon, with its Milford Dynamic Fund holding a 7.4 per cent stake and its Trans Tasman Fund with 1.4 per cent.
Slater and Gordon is also the biggest Australian investment for its Milford's Active Growth Fund, which has a 2.9 per cent stake.
Shares in Slater and Gordon continued their downward spiral on Tuesday, losing another 22 cents, or 5.8 per cent, to close at a 32-month low of $3.56.
The stock has lost 45 per cent in the past week, when the concerns about the law firm began to emerge.
UBS analysts Martin Byers and Jack Briggs have downgraded the stock to neutral from buy and slashed the investment bank's 12-month price target to $3.70 from $7.90.
However they still expect the law firm will lift its net profit by 25 per cent to $75.3 million in 2014/15.
In a note to clients, the analysts said Slater and Gordon was facing some serious issues which bring into question the accuracy of its historical financial statements.
"Until the findings of ASIC's investigation are provided, forming a view on underlying earnings and valuation is challenging," they said.
However Deutsche Bank research analyst Dominic Rose has maintained a buy rating on the stock, noting its recent hefty falls.
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