New Star says while prospects for companies in the sub-Saharan region remain strong, the impact of the credit crunch and the knock-on effect on global stock markets has resulted in an increase in redemptions from investors.
Events in Nigeria and Ghana have had a particular impact on the fund’s liquidity position, according to New Star.
It says in Nigeria, where the fund is approximately 30 per cent invested, the repatriation of monies received from selling securities has been delayed by restricted foreign exchange flows. At 11 December the fund had $6.2m of proceeds from disposals awaiting repatriation from Nigeria.
New Star adds that in Ghana, where the fund is approximately 21 per cent invested, the market has been less liquid than normal and trading volumes have been lighter as a result of the uncertainty ahead of the general election.
It adds the close election result registered on 11 December means there will need to be an electoral run-off, which could potentially delay the resumption of normal trading.
New Star says the temporary suspension of dealing is designed to restore sufficient liquidity to the fund for it to meet redemptions once it re-opens for dealing. It adds the suspension should last for no more than 28 days.
Heart of Africa fund manager Jamie Allsopp says: “It is with great reluctance that New Star has temporarily suspended dealing in the New Star Heart of Africa Fund. Since launch last November, the fund has performed relatively well amidst the turmoil of the past year falling 24.40 per cent. This compares favourably with the 38.78 per cent fall in the MSCI Emerging Markets Total Return Index. The FTSE All-Share Total Return Index has fallen 29.8 per cent over the same period.
“I still believe, despite this temporary suspension, the fundamental prospects for the region remain attractive over the medium to long term.”