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The miles file

New Star has made much of its performance record of late, centred on the statement that all but one of its equity funds is top-quartile since launch.

After all, John Duffield, former head of Jupiter Asset Management and now the driving force behind New Star, has never been one to make little of his achievements.

Judged by its own standards, New Star has made an impressive debut. Its performance relative to the peer group has been top-notch and when the ship has gone off keel – as when the UK growth fund fell away – Duffield has lost no time in intervening. In that case, the original fund manager, Alan Miller, made way for Stephen Whittaker, the former Perpetual star.

Yet, measured by the more humble yardstick of cash – arguably the only benchmark that counts with retail investors – New Star&#39s equity funds have been much more of a mixed bag. Sure, it had the misfortune to launch funds in the early stages of a bear market. It is an interesting question whether Duffield would have taken the plunge if he could have foreseen how long the bear would have ground down the market. But until the market lows of mid-March, cash has been king.

The UK growth remains well below its launch price, as does the other original fund, European growth, run by Richard Pease. The same is true of European leaders managed by Richard Lewis while the UK aggressive fund run by former analyst Tim Steer is also a shade short of its starting sale price.

UK select opportunities, the vehicle designed for stockpicker Patrick Evershed, has just passed its launch price although its debut was at a later stage in the bear equity market. Global Financials, inherited through an acquisition, has been in positive territory for some time.

Duffield&#39s resolve to stick by quartile ranking in his advertisements – and his apparent willingness to criticise the competition – has ruffled many feathers. Competitors will always take swipes at each other, whether in public or private. But it is surprising given the FSA&#39s determination to clean up advertising.

The watchdog has not ruled out the use of past performance in ads but it does want to tighten up the way such data is used.

It is the absence of a cash benchmark that consumers should find worrying because they understand that far more clearly than any quartile figure or sector ranking.

Quartiles and sectors are fine while the market in general is rising – it is not whether you will make money, but how much – but after the slow-motion collapse of equity prices since early 2000, people want to know how the fund compares with a deposit account.

To be fair to Duffield, the ads do show whether the funds have grown or contracted. Anyone with a long memory, however, will recall the great poster campaigns of the mid and late1990s that showed a company&#39s performance relative to the returns available on a building society or bank deposit account. M&G and Perpetual, both adherents of this cause, must have delighted in the bar graphs showing a sky-high return for share-based funds against the stubby bar for cash.

Funny how no one runs this type of advertisement anymore. Were one to mock up such a graph for the average UK growth fund over, say, the past five years, then the equities bar would be heading south (the median loss is close to 14 per cent) while the deposit account bar would be thrusting upwards, heading for the region of 20 per cent. It would not be very flattering for the funds industry.

Still, you have to admire the chutzpah of Duffield to continue with performance-based ads – essentially all that matters to an investor – while the competitors in the equity field push concepts or sentiments in their campaigns.

More encouraging still is that individual fund managers are at last being given the opportunity to pursue absolute returns in a “long-only” fund – a conventional investment that does not permit the manager to make money out of falling prices by “shorting” stock.

This policy is most common among the investment houses that have embraced the “concentrated” portfolio – the manager&#39s best 30 or 40 bets.

It has paid off for the likes of Richard Buxton, manager of the Schroder Alpha fund, who produced a 7 per cent return in his first year against a market that was down 13 per cent. Imagine what Duffield would do with those figures.

Richard Miles is deputy personal finance editor at The Times

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