Richard Pease, seasoned manager of New Star European Growth, has agreed to stay at Henderson following the takeover. Also, Nick Sheridan who managers European Value, Simon Rowe, co-manager on European Growth and analyst James Milne will all join Pease. This should come as a relief to Henderson after Tim Steer, manager of New Star UK Alpha and UK Gemini hedge fund, said he will be leaving the firm to join Artemis at the completion of the acquisition. Pease is a talented manager and his loss would have been a blow.
New Star gives Africa investors a 20% haircut
Also at New Star, the firm managed to secure a buyer fo
r the securities in its suspended Heart of Africa fund, with investors promised to receive proceeds by the end of April. The fund was suspended in February this year, having shed a hefty 33% in 2008 and a further 20% in January 2009, trailing the average emerging-markets equity category by 13 percentage points. The firm attributed this to an increasing illiquidity in the sub-Saharan region. A rise in redemptions worsened the situation as the portfolio became more concentrated in illiquid securities.
The fund will be sold at a roughly 20% discount to its last valuation on 6 Feb. The move is apparently being made solely to wind up the fund sooner rather than later. That's a laudatory goal, but although we don't know what the fund holds, we do note that MSCI Frontier Markets Africa fell just 2.55% from 6 Feb through 31 March. That index includes Kenya, Mauritius, Nigeria and Tunisia; the first three countries accounted for 55% of the New Stars fund's stated target allocation at launch; Tunisia was not part of the fund's target allocation (though again, we don't know what the fund actually held). South Africa accounted for another 7.5% of the fund's target allocation; the FTSE All Share South Africa index rose 11% in the period. We would be more comfortable with the situation if New Star provided investors a clear accounting of the positions in the fund and why they believe the specific discount applied to each is appropriate.
The situation highlights a few key points. First, don't believe the marketing hype around fund launches. We don't think any individual investor needs an Africa-focused fund, and in our view there was no particularly good reason for New Star--with little in house expertise in the area--to launch one. We greatly prefer broader emerging markets funds where the manager has the freedom to favour particular markets if he thinks they represent good value. In contrast, narrowly targeted funds like this leave the investor to make that decision for themselves, and often charge far more for the privilege.
Henderson trims price for New Star
Henderson has said it is reducing the price it will pay for New Star by £8 million. Henderson chairman Rupert Pennant-Rea said, " . . . we have come across some ambiguities in the way the price adjustment mechanism would work, so earlier today we reached a compromise with the Banks and New Star which provides certainty for all parties. We have agreed that the price of the proposed acquisition will come down from GBP115 million to GBP107 million in full and final settlement of the price adjustment for the revenue run-rates at completion."
Third Avenue launches UCITS range
Deep value specialists Third Avenue are making a foray into Europe from their New York base. The firm, long highly regarded by Morningstar analysts for its relentless focus on value and forthright communication with fund shareholders, has this week launched all four of its key strategies as Dublin-based UCITS offerings. The firm is headed by Marty Whitman, who has a deep knowledge of distressed debt and bankruptcies. The funds being offered by Third Avenue in Europe in include Third Avenue Value Fund, Third Avenue Small-Cap Value Fund, Third Avenue Real Estate Value Fund and Third Avenue International Value Fund. Morningstar US associate director of fund analysis Bridget Hughes, writing about the version of Third Avenue Value that is sold to US investors had this to say recently: "Given the market environment, in which many expect more corporate distress, we think Third Avenue's special expertise is an advantage. Meanwhile, we've always liked the fund's careful stock-picking approach for the long haul." Third Avenue funds typically deliver strong risk-adjusted results for investors in the long-term, but their willingness to buy distressed debt and deeply out of favour companies means investors should be prepared to wait out the occasional rough patch. In 2008, for example, Third Avenue Value in the US lost 25.6% in GBP terms (46% in USD terms).
BlackRock re-shuffles emerging markets team
BlackRock has appointed Plamen Monovski to head the global emerging markets desk following the departure of Alain Bourrier, who will be taking a career break. Monovski currently runs Blackrock Emerging Markets and its offshore counterpart and will be assisted by London-based co-managers Sam Vecht (who will also co-manage BGF Emerging Europe), Dhiren Shah and Daniel Tubbs. The three are specialists in Europe and Middle-East, Latin America and Asia equities, respectively. The team will continue to draw on the expertise of Will Landers, who is based in Princeton and runs the BGF Latin American fund.
First State plan Latin America fund launch
First State Investments will launch a Latin America fund for UK and European investors, subject to FSA approval. The fund’s approach will mirror that of other emerging market offerings at the firm, targeting companies with strong growth potential particularly in Brazil, Chile, Colombia, Mexico and Peru. The fund will be managed jointly by Jonathan Asante and Millar Mathieson, with Alan Nesbit as deputy manager. Asante has been with First State since 2004 and boasts two decades of experience in emerging market equities. He is currently co-manager of First State Global Emerging Markets and First State Global Emerging Markets Leaders, both of which have qualified for a Morningstar Elite rating from Morningstar's qualitative analyst team. We hold First State’s 19-strong global emerging markets team in high regard, led by industry veteran Angus Tulloch. You can view our full qualitative fund ratings and reports on these funds here and here.
Schroders appoints Bhatia to replace Lai
Schroders has appointed Manish Bhatia on board Schroder ISF Indian Equity and Schroder ISF Pacific Equity. The funds were previously run by Millicent Lai who stepped down last year and they were handed to Asian equities head Louisa Lo in the interim. Bhatia joined Schroders from Manulife in September 2008, where he was head of Asia ex Japan equities, and has 14 years investment experience in the region. The funds’ performance has been relatively strong in the last year as they weathered the market woes better than their average Morningstar category rivals. Over the last three, five and ten years, however, the Pacific Equity fund has trailed the average for its Asia Pacific ex-Japan Equity category and resided consistently in the third quartile.
Insight launch UK Equity Income Booster fund
Insight Investment has this week added to its UK equity income fund range. Insight UK Equity Income Booster fund will invest in predominantly UK equity securities and will be using derivatives systematically in an attempt to boost-up yield. The fund is run by Tim Rees who has worked at Insight (formerly Clerical Medical) for 25 years, and derivative specialist Richard Llloyd, previously head of structured investments at Schroders. Rees currently manages Insight Monthly Income and Insight Equity High Income and performance over his tenure has been strong. Insight Monthly Income has generated 3.2% in returns since Rees took the helm in September 2002, outperforming his average rival in the Morningstar Sterling Aggressive Balanced category by 44 basis points. Insight Equity High Income also bested its average UK Large-Cap Value peer by 31 basis points.
Allianz extends equity income lineup
Allianz Global Investors has this week renamed its FTSE Eurotop 300 (ex UK) Index tracker, Allianz RCM European Equity Index, and given it a new remit. The fund is now called Allianz RCM European Equity Income and will be actively managed. The new fund is run by RCM Europe CIO, Neil Dwane, and co-CIO Joerg de Vries-Hippen. The managers will invest in high quality European (ex-UK) blue chips, but investors will undoubtedly pay more for the privilege and, assuming they bought the fund as a low cost tracker, will want to sell and go elsewhere.
UK funds assets under management slump 5% in February
UK domiciled funds' assets under management fell by 5% between January and February 2009 to total £339.2 billion according to the latest figures from the IMA, the trade association that promotes the business interests of UK asset managers. This reflects the ongoing volatility and negative sentiment in the market. The same pattern held true for overseas funds which witnessed a higher drop of 10% and are now at £13.7 billion. These figures also represent declines of 23% and 16% from February 2008 levels for UK and overseas funds, respectively.
Net sales of UK domiciled equity funds dropped £66 million and were offset with a £1,058 million increase for fixed-income offerings in February 2009. The IMA Sterling Corporate Bond sector was the best selling sector overall for UK domiciled funds for the fourth month running, and IMA Japan the worst with outflows of £172.9 million.
Morningstar qualitative ratings and reports issued this week
Morningstar issued new qualitative ratings and reports on a number of funds available to UK investors this week, including Blackrock US Dynamic, First State Global Emerging Markets Leaders and Morgan Stanley Sterling Bond. Click here to see the full list.
