New Star is set to merge its £28.2m Tri-Star unit trust into Craig Heron's £47.6m Cautious Portfolio fund.
New Star said the merger is planned for Friday 8 August, subject to FSA and investor approval. It follows a drop in Tri-Star’s three major asset classes - equities, bonds and property - plus a shift in the Cautious Portfolio’s investment strategy.
Since fund launch in July 2006, Tri-Star has struggled to meet its return expectations and New Star believes a merger will benefit investors.
“Funds that are constrained by style will suffer when market cycles move against them, and there has been no harsher lesson than the recent credit crisis,” said Mark Skinner, managing director at New Star.
New Star says the fund of funds approach used in the Cautious Managed portfolio will enable investors to access the expertise of several specialist managers. Furthermore, the fund can also “shift in style” more quickly than a fund that invests in a portfolio of individual stocks – of particular advantage in a change of market conditions.
This added flexibility should mean the Cautious Portfolio will be in a stronger position to pre-empt and react to market and economic events than the New Star Tri-Star Unit Trust with its ‘three assets’ approach, said the firm.
The investment objective of the Cautious Portfolio unit trust was recently changed to aid flexibility by removing the requirement to produce income, as this stipulation proved restrictive for the manager and stifled potential returns.
The new investment policy will also allow the use of derivatives and forward transactions for efficient portfolio management and investment purposes.
At 30 May, Heron’s Cautious Portfolio fund had exposure to UK equities and bonds, emerging markets equities, Asia Pacific ex Japan equities, global bonds and others including mining and property funds. Geographically, the majority of the fund is invested in UK fixed interest and convertibles, followed by UK equities and then global bonds.
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Alongside Barrett, Hopkins, Boston and Thorman on 17 October