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Star performance

Advisers believe New Star’s rise to the top of the retail fund sales league is down to service and performance.

New Star’s retail sales rose by 175 per cent in the final quarter of last year compared with the previous quarter, beating the nearest competitor by 50m, according to the Pridham report.

Its net retail sales hit 268.85m and have been att-ributed by the Pridham report to its acquisition of Edin-burgh’s property fund in 2003 and its decision to bring the management of the fund in house. The fund has been popular with IFAs and accounts for 25 per cent of total sales.

New Star marketing director Rob Page thinks the reasons for the group’s surge in sales are wider: He says: “Our sales numbers are testament to the quality and breadth of investment resource we have. More than 95 per cent of our new fund sales come from UK intermediaries. Some of our competitors have shown ambivalence towards the IFA sector as depolarisation loomed but our figures prove that it is very much alive and kicking.”

IFAs seem in broad agreement about the reasons for New Star’s success. Har-greaves Lansdown head of research Mark Dampier says: “New Star is a great supporter of the intermediary market, although, ultimately, IFAs support groups because they are performing well. If a group is performing, and it has a good service to match, it is a double whammy really.”

Last year, New Star made 1.3bn-worth of retail sales, crucially with eight funds selling more than 50m each.

Hargreaves Lansdown in-vestment manager Ben Year-sley thinks it is New Star’s cross-the-board performance that has set it above its competitors. He says: “It has a range of very good funds, with UK, European and Asian, fund of funds, and corporate bonds doing well. There is quite a difference between New Star’s and Jupiter’s performance which I would imagine to be largely down to Jupiter not being particularly strong in the Far East and not having a property fund.”

He thinks Framlington, which was placed second in net sales with 217m, is riding on the back of managers George Luckraft and Nigel Thomas, whose UK equity income and UK special opportunities funds have been strong performers.

Skandia came third but this ranking is largely down to its multi-manager products. Of Fidelity, who came fourth, Yearsley says: “Fidelity is running a one-horse race, with Anthony Bolton and a couple of other fund managers bringing in the majority of its sales.”

John Scott and Partners re-search and investment manager Pat Connolly believes New Star’s success has much to do with marketing. He says: “New Star has stood out from the crowd in recent years because they have promoted in what have been relatively difficult times. While they are strong performers, they are not the best in all areas. Its marketing has helped a great deal.”

BestInvest business dev-elopment manager Justin Modray says: “By pushing its commercial property fund when equities were in the doldrums, New Star spotted a gap in the diversification market which it could fill with a strong performing fund.

“Its strategy has been partly to educate advisers but New Star knows that IFAs chase performance. I have noticed that their Tube ads are now pushing income which is a good idea in the current market because people are not sure what is going to happen. They know which buttons to push.”

One area where Jupiter has beaten New Star is in the percentage increase of multi-manager sales. Of New Star’s fund of funds team, F&C fund of funds director Richard Philbin says: “They take bigger individual fund bets than we do, and have an aggressive style.”

Jupiter’s multi-manager fund sales are up 20 per cent from 44.9m to 54.5m over the quarter, while New Star’s multi-manager sales have remained relatively steady.

Jupiter does not feel it was appropriate to comment on a competitor’s success but head of retail communications Alicia Wyllie says: “In multi-manager, we have the best team. We are the only multi-manager house to have two AAA-rated fund managers managing our Merlin growth and Merlin income funds. We have the right people who work incredibly hard at what they do.”

When it comes to attracting the right people, Dampier says fund managers are attracted to successful people like John Duffield. He says: “Fund managers have seen the equity given to Jupiter people after the sale to Commerz-bank and they want some of that.”

An industry source agrees. He says: “All the fund managers at New Star have big chunks of equity tied up. When the firms floats, they will get rich. Frankly, John Duffield is going to allow them all to quit financial services forever if that is what they want.”

New Star was launched by John Duffield in 2001 following his high-profile departure from Jupiter which he founded in the 1980s. His resignation followed a falling out with Commerzbank, Jupiter’s German buyers.

Dampier is impressed by Duffield’s media presence. He says: “If you have a big row with a German bank, you are going to get a lot of free publicity. Newspapers continued to talk to John a year-and-a-half after the row and when New Star was launched the newspapers all knew about it.

“In 2001, the market was not rosy but we had clients ringing us up before New Star launched, asking us if they could buy Duffield’s funds. To have generated interest when there was not anything to buy yet, he had done extremely well. He is a shrewd operator.”

It seems the industry re-spects New Star’s aggressive business model – recruiting good fund managers and marketing its good performance – even during difficult market conditions. The respect has translated into strong sales. It sounds too simple, but maybe that’s the point.

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