Each month RealAdviser asks a panel of fund selectors to give their verdict on a company's fund range. This month New Star gets the once-over
Richard Philbin, Head of F&C Multi-Manager
New Star has set its stall out as a pure investment business with no set process across the company, which gives fund managers autonomy to buy and sell as much or as little as they want. Richard Pease for instance on the European Growth fund has about 75 stocks with a mid cap bias, but Tim Steer on the UK fund has only about 40.
The management and staff seem to have strong incentives to perform - both through equity and long-term bonus plans - albeit over a rolling three and five year time frame, not the previous twelve months. They are being primed to float on the stock market, but then again, this has been touted for some time. The group is not afraid to "think outside the box" - such as closing Patrick Evershed's fund when it reached £50m.
New Star has attracted and retained very high quality people - not just on the fund management side (Richard Pease, Stephen Whittaker, Theo Zemek, Phil Roantree and Mark Harris) but also on the sales & marketing side - the recent appointment of Phil Wagstaff for instance means Mark Skinner can focus on European ambitions.
The company is driven from the front - very few companies have as high profile a boss as John Duffield. Growth in assets has been exceptional - the business is only four years old. It has grown also by acquisition - assets from Edinburgh (Aberdeen), Exeter, WorldInvest etc.
Bambos Hambi, Head of Multi-Manager at Gartmore
Having been highly successful with Jupiter Asset Management, John Duffield has thus far given a repeat performance with New Star. The fund management industry has evolved significantly over the past decade, yet John's experience and shrewd nature have ensured he has often led the way with change.
New Star has assembled a quality team (for example, Patrick Evershed, Richard Pease, Toby Thompson, Stephen Whittaker, Theo Zemek, Alan Miller) and given them the environment to perform. This wealth of experience complements some of the younger, promising managers (Jamie Allsopp and James Ridgewell for instance).
There is no reliance on a single house process. Managers are encouraged to manage money in the manner they see fit. The culture is one of active fund management, where managers are not constrained by benchmarks. This has proved successful in an environment where small and mid-caps have outperformed. The focus is on delivering investment performance. The distribution side of the business is managed so as to be efficient with fund managers' time.
Managers are not flooded with institutional mandates. Largely, segregated mandates will mirror the retail funds. The majority of fund managers are equity-holders in the business, with their remuneration also heavily tied to performance. For us as fund of funds managers, this is a re-assuring facet given that we work in an industry where talent is highly mobile.
On the long-only side, the business has focused principally on Pan-Europe. The retail product range lacks strong offerings outside the UK and Europe.
In terms of sales it has been very effective in the retail market place with a strong advertising presence. In a relatively short space of time, New Star has created a powerful brand, encapsulating both strong performance and support to intermediaries.
Our experience of New Star has been almost flawless. The majority of staff members, as equity-holders, are well grounded in the culture and have sufficient expertise in their respective areas.
Patrick Armstrong, head of fund and manager selection at Insight Investment
Insight's multi-manager team holds Toby Thompson's New Star Higher Income fund across a number of the fund of funds we manage. We like his consistent approach to investing exclusively in stocks that give yield premium to the market. The fund also benefits from Toby's assessment of a company's management and the share's valuation. He has a good knack for positioning his portfolio to benefit from top down factors.
The pending float of the group is the major matter, from a corporate perspective. New Star has been successful in attracting star managers and growing assets in previous years. This has been reflected in the anticipated valuation of New Star when it does float. The significant appreciation most early-joining managers have in their company shares, and the lock-in period after float, diminishes the manager departure risk.
Ben Yearsley, Investment Manager, Hargreaves Lansdown
I can't really comment on the group's process, it's just a good group with good managers who run funds their own way. Some funds work and others don't, managers do bounce ideas off each other but overall it's down to them to manage their funds.
One criticism is that it has too many UK funds; it has a total of six in the UK All Companies sector (Hidden Value, Select Opportunities, UK Alpha, UK Growth, UK Special Situations and UK Strategic Capital).
One of its best managers is Richard Pease, who runs New Star European Growth; he adds value time and time again.
New Star's style is small to mid-cap orientated and although they have periods of underperformance you would back them in the long-term.
Gary Potter, joint head of Multi-Manager services, Credit Suisse
John Duffield has constructed two of the most successful fund management businesses over the past 15 years. He has done it by hiring and rewarding talent. It has created a good blend of experience and potential. The managers are now running quite a lot of money. The group is strong in Europe with Richard Pease, in the UK with Toby Thompson and Tim Steer and in bonds with Theo Zemeck and James Gledhill. It also has James Ridgewell and Jamie Allsop emerging as strong talent. It hasn't been as big in the US or Japan.
I wouldn't be worried at all about the flotation. I would be more worried about a delay as there are people who are waiting to realise their assets. As long as the people who are delivering the returns are happy, that is the most important thing.
An ambitious objective
'Something completely new'
'Illusion of control'
Reasons to be cheerful
Total investment reaches £9m