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Dropping the dime

New Star founder and chairman John Duffield has wielded the axe on his firm’s range of funds again this week after it was announced that the group is looking to merge two of its struggling single-country funds.

Both the £5.5m Japan fund run by Amanda Gold and the £7.7m North America fund run by Greg Kerr have both been plagued by poor uptake and underperformance, with both vehicles offering fourth quartile returns over three and five years.

The Japan fund will be merged into the £105m New Star Pacific growth trust run by Ian Beattie, while the North America fund will be merged into the £12.6m America portfolio, a fund of funds offering managed by Mark Harris.

Subject to approval, the merger will go through on June 13, with both Gold and Kerr staying on to focus on their institutional responsibilities.

New Star investment funds managing director Mark Skinner says: “By consolidating these small portfolios into more established funds with broader remits, New Star is seeking to improve its performance for investors. Investors in these should be well served by Ian Beattie and Mark Harris.”

New Star is not the first firm in recent memory to do away with struggling regional funds in favour of a more diversified approach. Credit Suisse streamlined its multi-manager range in the summer of 2007 after poor uptake of its regional funds.

The four funds – European, North America, Japan and Asia Pacific pulled only £75m of assets despite having run for six years.

Duffield has already made changes to his fund range in 2008, merging James Ridgewell’s UK special situations fund into Tim Steer’s UK alpha fund back in February.

This decision to do away with two single-country funds in the developed world fits strongly into what Duffield has been trying to do with the business. He believes that we have seen a change in the investment world in the past two years with emerging markets overtaking the more establish western markets. Hence the launch of an India fund and a potential launch in China at some point down the road.

Meanwhile, Barings has deferred the launch of its European income fund in a bid to take advantage of the recent changes to capital gains tax.

Marketing director Ian Pascal says the new 18 per cent flat rate of CGT has prompted the firm to look at new ways to distribute yield.

He says: “We are working on this subject in order to find a way to pay dividends as capital gains rather than income following the announcements in the Budget, but we have set no timeline for proposals or a potential launch.

“At the moment it is a case of us being optimistic but not naïve about making potential changes.”


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