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New Stars and old scars

Just when you think nothing coming from within the offices of New Star Asset Management will surprise you anymore, lo and behold the firm bowls a ball with so much spin on it that it would make Shane Warne proud.

The latest googly came courtesy of the announcement of former chief executive of the FSA John Tiner’s appointment to the group’s board as a non-executive director.

The appointment from New Star’s perspective is supposed to shore up confidence in a group that has had a difficult few months to say the least.

Tiner and New Star founder and chairman John Duffield are no strangers to one another, having worked closely in forming the £194m compensation deal in the wake of the split cap investment trust scandal in 2004.

Informed Choice director Martin Bamford believes Tiner’s appointment is a prudent move on the part of Duffield as it gives the firm an insight into the developing retail distribution market from the regulators perspective. Not to mention a wealth of knowledge and experience.

Tiner’s motivation is more interesting. Having been under the microscope at the FSA he could not have chosen an asset manager that is feeling the heat anymore than Duffield’s own firm.

Tiner’s appointment comes as New Star posted a rise in operational earnings of 36 per cent to £98.1m in the year to December 2007 and pre-tax profits rose by a quarter to £62.8m.

However, the group also announced outflows of 12 per cent of its assets under management so far in 2008, from £23.3bn to £20.3bn by March 18, in the wake of volatile market conditions.

Assets under management rose 9 per cent from £21.1bn to £23.3bn at 31 December 2007. However, the changing market conditions in 2007 have seen outflows from the second half of the year.

New Star chairman John Duffield says the market in the second half of 2007 and the start of 2008 has been the most challenging time for New Star since it began trading in 2001.

Between July 2007 and March 2008 the firm’s share price has plummeted from 452p to 91p. As of Tuesday morning the group’s share price stood at 103.75p.

Duffield says: “We expect 2008 as a whole to be a year of consolidation for our business. Our company has entered a more challenging environment with a diversified mix of funds covering a broad range of asset classes and a wide range of retail and institutional clients, both in the UK and overseas.”

While his firm has been through tough times, Duffield’s proactivity cannot be overstated. Rumours of new fund managers as changes are made at the helm of funds indicate he is willing to do all that it takes to get New Star right. He has made many a millionaire before and is almost certain to make more again. Watch this space.

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