Despite being one of the biggest fund pushes from the firm since its launch back in July 2006, the decision to merge the fund will not come as a special surprise to many, given that performance has been consistently poor.
The last 12 months alone have seen the fund lose 16.7 per cent in the IMA cautious managed sector making it the third poorest performer in that time.
The fund itself was built on the premise of offering diversity to investors through a one-third equal exposure to equities, bonds and property. However, what was thought to be the funds strength has actually turned out to be its biggest weakness, with the inability to tweak exposure as the credit crunch hit and property tailed off markedly in the later half of 2007.
Chief investment officer Gregor Logan was responsible for asset allocation of the fund, with Roger Dossett, Edward Collins and James Gledhill running the property, equity and fixed interests portions respectively.
The fund itself will now merge into Craig Heron £47.6m cautious managed fund of funds portfolio. Heron’s fund is seen as the ideal investment alternative for those in the Tri-Star offering, particularly as the firm recently relinquished the requirement to produce an income, which is seen to restrict the fund’s investment style.
As multi-asset funds have grown in popularity it seems New Star has acknowledged that Tri-Star was not as diverse as the firm first thought. The merger will take place on August 8, subject to FSA and shareholder approval.
Managing director Mark Skinner says: “Tri-Star was designed to be cautious in nature but the unprecedented fall in value of the three major asset classes highlighted the need for greater flexibility and diversification.
“Investors in the cautious portfolio should benefit from the fund¹s greater adaptability and broader investment remit.”
Hargreaves Lansdown investment manager Ben Yearsley says: “I’m not surprised New Star has merged Tri-Star with its cautious managed fund. As an offering it never caught on and was far too restrictive in the way it diversified its assets. Hopefully investors will get the better of the deal following this change made by the firm.”