New Star is looking to recruit additional fund managers to turn around "unsatisfactory" performance on some of its UK funds.
Chairman John Duffield admits the firm needs to broaden and strengthen its UK team following New Star’s “most difficult period” since it began trading in 2001.
Net retail sales fell 21% to £1.4bn last year, as challenging second half market conditions and outflows from its UK commercial property fund punished the firm.
Duffield says the crisis in the UK commercial property market affected the business “significantly”, with the firm still experiencing modest net redemptions from the fund.
New Star increased its assets under management (AUM) to £23.1bn last year, but at 18 March 2008 its AUM have fallen to £20.3bn. Within this total, UK mutual fund assets are £9.5bn, down from £10.6bn, including £300m outflows.
“In January, we anticipated net outflows of assets during the first half of the current financial year and this has been confirmed by our experience during the first 11 weeks,” Duffield says.
“Redemptions have continued from our international mutual funds and we have also experienced redemptions from our UK mutual funds as UK retail investors have sought to reduce their exposure to mutual fund products as a result of concerns about the longer-term consequences of the credit crunch.
"We are recruiting some additional fund managers to broaden and strengthen our UK team, where the investment performance of some of our UK funds remains unsatisfactory."
Duffield admitted the firm’s European funds and some UK funds were poorly positioned for the impact of the credit squeeze and high commodity prices.
“New Star has had a difficult start to 2008, with our sales momentum affected adversely by depressed investment market conditions and the poor relative investment performance of some of our principal products,” he says.
However, New Star did record a 29% net revenue increase in 2007, to £173.3m.
“We have delivered results fully in line with expectations; but, as we have said before, the second half of 2007 and the start of 2008, have been the most difficult period for New Star since we began trading in 2001 and we expect 2008 as a whole to be a year of consolidation for our business,” Duffield says.
“While the trading environment remains challenging, there are early signs that at least conditions are no longer deteriorating.
“We continue to expect, in line with our January trading statement, that operating profits will be significantly lower in 2008 than in 2007."
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