New Star Reorganises: Whittaker Out

Embattled New Star co-CIO departs amid poor performance. Firm to merge funds.

Christopher J. Traulsen, CFA 21 November, 2008 | 2:49PM
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New Star announced today that it was significantly reorganising its fund management team, including the departure of co-CIO and New Star UK Growth manager Stephen Whittaker.

Whittaker, who had considerable long-term success at Invesco before comin

g to New Star, had struggled mightily at New Star UK Growth and New Star Equity Income during the market meltdown as he continued to aggressively invest in falling financials. In an attempt to smooth performance of Equity Income, New Star brought Charles Deptford in from Barings and he took the helm of that fund in July. Whittaker continued to run UK Growth, however, but to ill effect, with the fund posting a 52.9% loss for the year to date through 20 November. The source of the problem is reasonably clear: As of 30 September, UK Growth had 34.9% of equities in financials, more than double the Morningstar UK Equity Mid-Cap norm. Trevor Green, who joined New Star earlier in 2008 from RCM, will manage New Star UK Growth going forward.

The firm is also re-organising its UK equity desk, giving Tim Steer and Green "enhanced roles" as senior managers. More specifically, they are being tasked with ensuring that there is better communication between UK equity managers so that strong ideas all are aware of investment opportunities (though New Star is careful to point out that team members will retain individual responsibility for their decisions). New Star is also planning to recruit a new chief investment officer, who will be asked to improve risk-adjusted performance at the house's funds.

Finally, New Star is proposing to merge several of its small, poorer-performing offerings away pending approval from the FSA and fund owners. The proposals are as follows: New Star Monthly Income to be merged with New Star Managed Distribution; New Star Hidden Value to be merged with Tim Steer's New Star UK Alpha; and New Star European Leaders to be merged with New Star European Value. The merged offerings would be run by Green, Steer, and Nick Sheridan, respectively. Jamie Alsopp would continue to manage New Star Heart of Africa.

The moves reflect a swift reversal of fortunes at New Star. The firm built its profile by hiring away successful managers from other shops and giving them wide leeway to manage money as they saw fit. The results were strong during the bull market, but many of the funds took bold stances that subsequently hurt them badly in the bear market.

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About Author

Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.