New Star suspends Africa fund
Troubled fund management firm New Star has suspended dealing in its Heart of Africa fund citing “illiquid sub-Saharan markets”.
The move follows a week of large redemptions from investors, spooked by the impact of the credit crunch and knock-on effect on global stockmarkets. The fund, valued at £29 million, will remain closed “until further notice”. Under Financial Services Authority rules, the suspension can last no more than 28 days.
Earlier this month, New Star announced it would de-list from the stockmarket with a banking syndicate made up of HBOS, Lloyds TSB, HSBC, RBS and National Bank of Australia taking a stake of up to 95%.
New Star says the prospects for companies in the sub-Saharan region remain strong but that some markets are illiquid. It has temporarily closed the fund so it can meet redemptions once it reopens for dealing.
Jamie Allsopp, manager of the New Star Heart of Africa fund, says: “I still believe, despite this temporary suspension, the fundamental prospects for the region remain attractive over the medium to long term.”
Allsopp adds that the fund, which was launched last November, has performed “relatively well” falling 24.40% compared with the 38.78%2 fall seen in the MSCI Emerging Markets Total Return Index and the FTSE All-Share Total Return Index’s fall of 29.8%.
Back in November, New Star suspended dealing in its International Property fund. Stuart Webster, head of global property at New Star, said that the move was an attempt to restore liquidity to the fund. He refused to speculate on when the fund might be reopened.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.