The New Star European special situations fund is managed by the director of pan-European equities, Richard Pease. It aims for growth but income share classes are also available as it will generate an income yield of around 3.5 per cent.
The fund will invest in European companies, excluding the UK, that are in special situations. Special situations may include companies that are in a turnaround or recovery situation, are the subject of a takeover or have been undervalued by the market.
The portfolio will comprise 30 to 50 stocks and Pease will be able to hold as much as 6 or 7 per cent in stocks that he feels strongly about.
Pease can invest in companies of any size, but is expected that around a third of the portfolio will go into big companies and the remainder will comprise small and medium sized companies.
Pease will look for business strategies that will generate robust earnings with growth potential. He will also focus on firms with strong management teams that have an equity stake in the business, sound finances and that are attractively valued. At the heart of the selection process is understanding how and why a business makes money. Pease will invest with profitable companies that have a competitive edge in their respective markets.
Pease, who joined New Star in 2001, has over 25 years’ investment experience. He counts Jupiter among his previous employers, having managed the Jupiter European fund between 1990 and 2000, and currently runs onshore and onshore European growth funds at Henderson New Star.
Pease has made his name by running smaller funds where investment decisions are not hindered by size and investors may draw comfort from both his experience and the decision to cap the new fund at £500m.
It could be a good time to invest in this region as markets such as France and Germany have recently picked up and it is possible to buy good quality stocks that have been mis-priced by the stockmarket.
However, there may be concerns about inflation and the level of growth that can be achieved over the next couple of years.