New Star has suspended dealing in its £29m Heart of Africa fund following an increase in investor redemptions.
The Jamie Allsopp-managed fund, which had £56m in assets at 31 October, has also been hit by a weakening in sub-Saharan liquidity after market closures in Ghana and Nigeria.
The repatriation of money received from selling securities has been delayed by restricted foreign exchange flows in Nigeria, where 30% of the fund is invested. At 11 December, the fund has $6.2m of proceeds from disposals awaiting repatriation.
Similarly, in Ghana, where 21% of the fund is invested, markets have been less liquid than usual with lighter trading volumes ahead of the general election. The close election result, requiring an electoral run-off, could delay the resumption of usual trading, said New Star.
As a result of the dual pressures on the fund, its depositary Royal Bank of Scotland has decided temporarily to suspend dealing in the vehicle until further notice.
Since its launch last November, the fund has fallen 24.4% against a 38.78% decline for the MSCI Emerging Markets Total Return index.
"Whilst we regret having to take this action, the temporary suspension of dealing is designed to restore sufficient liquidity to the fund for it to meet redemptions once it reopens for dealing," the New Star statement reads.
"New Star intends to minimise the period of suspension; in accordance with FSA rules this should last for no more than a maximum of 28 days."
The latest development for the troubled asset manager comes less than a month after the firm was forced to suspend dealing in its £674m International Property fund following large institutional redemptions.
Redemptions are currently halted as part of a 28-day suspension period but the firm is in discussions with the FSA over indefinite suspension.
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First mentioned in Cridland Report