The firm was forced to suspend trading on its heart of Africa fund this morning following liquidity issues. Jamie Allsopp’s fund has seen a number of redemptions as investors look to de-risk, and the fund size now stands at just £29m, a third of the size if was in August 2008.
According to Premier Wealth Management managing director Adrian Shandley, New Star’s mainstream funds may be able to weather the storm circling the firm but the future of its specialist funds remain uncertain.
He says: “The New Star property fund is the pre-runner to the Africa fund and when they let these specialised funds down it shakes confidence in the whole group.
“When confidence has gone and we’re in a time of downturn, the specialist funds all take a real beating. The more mainstream funds will probably come out of this alright but I don’t see a bright future for New Star’s specialist funds. What lies ahead are difficult times for New Star because there is a perception from the public and advisers that the firm is in chaos.”
Even Tim Steer, arguably the group’s shining light in recent times, saw his UK alpha fund apply a dilution adjustment following a large withdrawal of one large institutional client. The adjustment took place on Tuesday and has since been removed, while Richard Pease has also lost one of his largest investors in his European offering.
Hargreaves Lansdown senior analyst Meera Patel says: “I think people should leave New Star alone for the moment as running for the door is benefiting no-one. We will just see more suspensions as a result of a knee-jerk reaction.
“The suspension of heart of Africa comes as no surprise to me, I hold the offering and it is something investors should look to hold for 10 years as opposed to one. If someone buys the business and keeps the manager I don’t see any call to change that view.”