The fund has outperformed the Investment Management Association’s active managed sector average over the last six years and is first quartile over one, three and five years to December 31, 2007.
New Star says it works out how much risk to take with each holding and invests in different asset classes as market conditions change. This means that if any of the market calls are wrong, the fund does not suffer too much.
It says the Nurs rules which widened access to offshore funds and allowed it to hold exchange-traded funds have also contributed to outperformance. Co-managers Mark Harris and Craig Heron use ETFs to access markets such as oil services and soft commodities that would otherwise have been unavailable. They recently sold out of gas and corn ETFs while adding a US homebuyers ETF.
Harris says: “We sold the corn ETF because we think the market is getting over-extended in the short term although we like it in the long term. We bought the US homebuyers ETF because it is an area that has had an earnings recession. Prices have come down 60 per cent plus, so it is a good contrarian holding.”