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New Star reveals four fund galaxy

NEW STAR INVESTMENT FUNDS

Galaxy Portfolio Service

Type: Portfolio management service

Aim: Income and growth by investing in three New Star funds of funds
and a New Star unit trust

Minimum investment: £25,000

Investment choice: New Star performance portfolio, New Star fund of
funds portfolio, New Star managed growth portfolio, New Star
monthly income unit trust

Income facility: Yes

Charges: Initial 5%, Pep/Isa transfers 4.25%, annual 1.5%

Commission: Initial 3%, renewal 0.5%

Tel: 0845 608 8702

New Star is pitching its portfolio management service at investors
who do not have enough money to benefit from traditional portfolio
management products which require investments in excess of
£100,000.

Arch Financial Planning managing director Arthur Childs explains that
the New Star Galaxy Portfolio Service is a rebranding of the former
Edinburgh portfolio service. He says: “The three fund of funds
products and the Monthly Income unit trust in the service all have four
or five-star Standard & Poors ratings. Mark Harris is the lead
manager and he is highly rated by Citywire over the last year. John
Cornes of Laing & Cruickshank manages the monthly income fund,
which is rated AAA by Citywire over three years.”

Looking at the useful features of the product Childs says: “The
minimum £25,000 investment can include Isa and Pep transfers.
The three portfolios are risk rated and at present all invest over 50 per
cent in UK equities. The monthly income unit trust has over 60 per
cent invested in fixed interest securities and can provide natural
income.”

Childs points out that where income is a priority, investors may wish
to use the monthly withdrawal facility. He says: “This provides a fixed
monthly income of up to 7.5 per cent of the original investment. The
income provided by such withdrawals will, of course, be subject to
the CGT regime rather than being liable for income tax. ” However, he
thinks this facility presents an opportunity for clients to
misunderstand the true nature of the product, as some clients will not
appreciate that capital growth in excess of 11 per cent a year is
required to support an income of up to 7.5 per cent a year.

When asked what he dislikes about the service Childs says: “To offer
additional protection to existing or continuing unit holders there is a
dilution adjustment of up to 2 per cent which may be charged on very
large sales or purchases. The charges, although fairly standard in
the industry, will still put off a large number of clients who could
otherwise benefit from this service. I particularly don&#39t like the charge
of £30 plus VAT for any transfers out. The tables in the key features
document say it all. Illustrated investment growth of 6 per cent over
10 years would be reduced to less than 3 per cent on the fund of
funds.”

Childs thinks New Star will face competition from the Fidelity Multi
Manager portfolio service with lower charges of 3.25 per cent initial
and 1 per cent annual. He concludes: “For clients looking for income I
much prefer the design of the WAY Income Plan, managed by
Richard Timberlake and his team at IMS, rather than having to sell
growth units each month in good times and bad.”

BROKER RATINGS:

Suitability to market: Good

Investment strategy: Good

Charges: Average

Adviser remuneration: Good

Overall 8/10

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