High-flying New Star executive falls to earth as his fund is axed

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The Independent Online

New Star Asset Management, the FTSE 250 fund manager headed by the outspoken City tycoon John Duffield, axed one its high-profile UK funds this weekend, demoting one of its high-flying young fund managers, James Ridgewell, who only 18 months ago was fronting a poster campaign for the group as one of "New Star's new stars".

Mr Ridgewell's UK Special Situations fund is to be closed down at the end of next month, subject to a unit-holder vote, with the remaining £35m left in the fund due to be rolled over into New Star's UK Alpha fund, managed by the former City analyst Tim Steer.

The Alpha fund has returned more than 100 per cent in the six years since its launch, almost double the average fund in its sector. In contrast, the UK Special Situations fund has returned just 11 per cent over the past three years, compared with a sector average of almost 40 per cent.

Mr Ridgewell will no longer have his own fund after the UK Special Situations fund is closed. Instead, he will assist Mr Steer in the management of the Alpha fund.

Mark Dampier, head of research at the stockbroker Hargreaves Lansdown, said: "I think they'd launched too many UK funds. You don't need so many – it's confusing for the market. So some consolidation is a good thing. But it's embarrassing for James. It's certainly a demotion."

Mark Skinner, managing director of New Star's investment funds business, said it was the right decision to improve performance. "New Star is taking action to improve performance for investors in the New Star UK Special Situations Fund," he said. "Investors in the New Star UK Special Situations Fund should be well served by Tim Steer, who has a strong long-term track record."

The fund closure is the latest in a string of bad news for New Star over the past year. Last month, the group's star corporate bond fund manager, Theo Zemek, left the company to join rival house Axa Investment Managers. Meanwhile, performance has been suffering across much of the group's fund range.

Richard Pease, the group's star European fund manager, has seen some of his worst performances since becoming a fund manager over the last few years, dropping into the bottom quartile over three years. Analysts estimate that around £1bn has been withdrawn from his funds over the past year.

Mr Dampier said performance in the UK has been poor as well, while the company's commercial property fund has also seen large outflows over the past year, forcing it to change its pricing, like many other property funds, to discourage redemptions.

"If there is a problem with New Star as a whole, it is perhaps that they're not really a team of fund managers," said Mr Dampier. "If you look at Jupiter or Artemis, you do at least get the feeling that they talk to each other a lot more. But at New Star, they tend to work as individuals.

"But all fund managers do have times in the wilderness, and you find that after two or three years out there, the best ones will come back. Even Fidelity's Anthony Bolton had around five years in the 1990s when he just didn't perform."