New Star is to can its Heart of Africa fund after market conditions left it unable to satisfy redemption requests.
Back in December the troubled fund management company was forced to suspend dealing in its Africa fund amid a flurry of investors - spooked by the impact of the credit crunch and knock-on effect on global stockmarkets - withdrawing their money.
Jamie Allsopp, manager of the Heart of Africa fund, said at the time that, despite the suspension, the prospects for the region remained attractive over the medium to long-term.
However, the fund, which was valued at £29 million, has now been closed in light on the global impact of the credit crunch. “The underlying liquidity problems with certain markets and stocks in the sub-Saharan region have not improved and, in some cases, have deteriorated as investors have become more risk averse and trading volumes have fallen,” New Star explains.
Re-opening the fund would have left investors with a portfolio of increasingly illiquid stock, it adds.
New Star will now invite bids for the fund, in order to help maximise the value for investors. The fund itself will be wound-up from 31 March and, depending on the successful sale of the portfolio, investors could expect to receive any money shortly after this date.
Allsopp says: “We regret having to take this action and realise that this is a disappointing outcome for investors. Having explored alternative routes, however, we believe the winding-up of the fund is the best means by which we can restore investors’ access to their money.”