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New Star funds dropped from Wealth 150 list

Hargreaves Lansdown has removed all New Star funds from its Wealth 150 list following uncertainty surrounding the investment group’s future.

The five funds that appeared in the list – European growth, UK alpha, global financials, heart of Africa and Indian equity – have been removed following the announcement that New Star is negotiating a debt-for-equity swap with its bank syndicate.

Hargreaves Lansdown head of research Mark Dampier says the decision is not a recommendation to sell as the fund assets are ringfenced but it would not be appropriate to recommend them, given the number of possible outcomes.

He says: “We have to wait for the facts, which I expect to come very soon. I expect that New Star is going to carry on, with the banks owning more.”

On Monday morning, New Star announced that it had requested a suspension of its shares alongside a statement revealing that it was in bank negotiations over its debt.

However, no formal request was made to the FSA prior to the announcement. The regulator then rejected the request. New Star’s share price fell to a low of 4p before recovering to around 7p on Tuesday.

New Star, which has over £230m of debt, recently renegotiated its banking covenants and plans to embark on a further cost-cutting regime after revealing a £3.1bn loss in assets under management in the third quarter of 2008.

It has merged a number of funds and seen the departure of UK growth manager Stephen Whittaker. The firm suspended dealing on its international property fund last week following increased investor redemptions.

Aberdeen Asset Management is seen as a potential suitor but chief executive Martin Gilbert says: “We would not do a deal in the current environment that involved taking on a big amount of debt. Any acquisition would also need to be EPS enhancing.”

Neptune says it could be interested in certain New Star assets while two other possible buyers, Resolution and Henderson, have refused to comment on market speculation.


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