The much-talked about fund reopened its doors to retail investors last week, what are its prospects under new management?
During the credit crunch and the financial turmoil that followed, falling asset values and rising redemptions had a devastating effect across all asset classes as correlations rocketed as fear spread across the market place.
Just as the collapse of Lehman Brothers has come to symbolise the meltdown of the banking system, so can the fall from grace of New Star be seen as the personification of the difficulties felt by the asset management industry. Now following the firm’s acquisition by Henderson, many of the New Star funds are being given a new lease of life; none more so than the New Star International Property fund.
The property sector suffered more than most, with many deals reliant on bank financing and the effect of plummeting asset values amplified by leverage, finding buyers for commercial property assets became almost impossible at a time when additional liquidity was needed to meet record levels of redemptions by investors fleeing risky assets. Between 29 September 2008 and 29 July 2009 the New Star International Property fund lost 41.28 per cent, compared to a loss of 20.6 per cent for the IMA Property sector index. Faced with mounting redemption requests and a severe lack of liquidity the fund suspended trading on 25 November 2008.
Under new management, with Mark Carpenter replacing Roger Dossett, the fund has been restructured and once again opened to retail investors on 12 February 2010. The fund has learnt from its past misfortunes and is confident that a liquidity level of 20 per cent of the fund will be enough to meet the needs of all its investors.
Performance of fund
Source: Financial Express Analytics
Apart from solving its liquidity issues, the fund has also benefited from the integration into Henderson’s 190 strong property team giving it a far greater level of analyst support than it previously enjoyed. These extra resources are likely to come in useful with global property markets either stabilising or starting a belated recovery; the fund’s diverse geographical exposure makes it well placed to profit from a wide range of arising opportunities.
Mark Carpenter, head of retail property funds agrees: “Capital values have begun to stabilise and even pick up in some international property markets. Investor sentiment is also recovering and the fact that commercial property has lagged other asset classes offers an opportunity to take advantage of attractive valuations ahead of the expected recovery starting in 2010. With Henderson’s property team able to cover all the key markets, we are well placed to identify the best opportunities.”
The fund invests in a mix of assets including quality income generating properties as well as looking for growth potential. Its global focus allows it to access both the mature markets of the developed west and the more dynamic and rapidly growing markets of South East Asia and the other emerging markets. This high level of geographical diversification should be high on most investors’ agendas as the uncertain economic future of the UK threatens to derail the nascent recovery in the domestic commercial property sector.
While it is only natural that many investors will struggle to look past the New Star International Property fund’s credit crunch nightmare, the fund should be viewed more as reincarnated than revived. With the backing of a much larger organisation and a new and experienced management team at the helm, the old adage that past performance should not be used as a guide to future returns has never been truer.
