Both markets have endured a torrid time recently, with funds in the Investment Management Association’s Japan sector losing 9.4 per cent on average in the past 12 months while the US has lost 3.9 per cent.
New Star plans to merge its £5.5m Japan fund into the £105m Pacific growth trust while the £7.7m North American fund will be merged into Mark Harris’s £12.6m American fund of funds portfolio.
Dampier says mergers usually mean that sectors are reaching their lowest ebb. He says: “I am not saying these markets are set to turn overnight but history dictates that when investment houses merge funds like these, there may be a turn-round coming. This decision may have been the right one for New Star but it does indicate how markets are going.”
Dampier points to M&G’s decision to merge its gold fund into its global basics fund in February 2001 as a prime example. He says: “Global basics has done well in recent years but you have to look at the returns from gold when they went through the roof.”
Chelsea Financial Services managing director Darius McDermott says: “This is the contrarian view and something that was highlighted with tech funds in recent years.
“For New Star, the issue has been that not only have the sectors underperformed but so have its funds.”