nstitutional team to provide asset allocation for new product
New Star Asset Management is offering the asset allocation skills of its institutional team to the retail market with a fund of internal funds benchmarked two-thirds equities and the rest bonds.
This launch is set to be the start of a series of offshore initiatives for the companies that could include restructuring its Luxembourg range, launch- ing an external fund of funds and launching a fund of hedge funds.
However, for the moment, New Star will be focusing on the new product, the Dublin-based Global Managed Fund, which is aimed squarely at the international advisory market with a $5,000 minimum, 5.25% initial and 0.75% annual charge.
Deputy CIO and head of institutional business Mark Beale, will run the product on the same basis that he runs his institutional mandates. There is a bi-weekly asset allocation meeting that determines the fund's geographical weighting relative to the benchmark. Then the appropriate funds are chosen within the New Star range to access those markets.
The benchmark is 70% MSCI World Free, 27% Lehman Global Aggregate and 3% cash.
Beale has created an aggressive portfolio, especially in his overweighting of the emerging markets and Asia, but the original plan was to be relatively cautious on asset allocation and let the individual funds be the main source of added value.
As New Star has a substantial range in the UK, Beale has an advantage there as he can switch between funds of different styles depending on market outlook.
'The UK equity market proxy we have been using is our Dynamic Fund, which has been one of our top performers. That's a fairly broad-based UK equity fund. But if equity markets continue to be strong then by the middle of the year we could, for example, change to Toby Thompson's Higher Income fund, because that is going to be more defensive.
'In the other regions, there is the issue that we have less choice. In the US, we have really only got one fund, in Europe, two.'
This situation could be helped if New Star restructures its dormant Luxembourg fund range, which contains a variety of more exotic mandates.
Beale concedes that the lack of choice could be a concern for investors in the case when the only fund that invested in a particular region was underperforming.
'A lot of what happens in investment is that people run away from what has done badly but that is often the time you should be investing in it,' he said. 'And in any case, it is certainly not an issue at the moment for any of the funds we are using,'
And if there was a serious issue with the ongoing performance of a fund the problem would quickly be solved internally.
'New Star has a record of not dithering if it has an issue with a fund,' he said.
More than £167,000 raised
Beware ‘temporary’ vulnerability
Partner Insight: A renewed focus on 'knowledge-intensive' companies should help investors realise that these entrepreneurial companies are found in sectors other than biotech or technology.
Celtic WM and Active Wealth