By ADRIAN LOWCOCK 01/12/2008
We have decided to suspend our ratings on all New Star funds pending greater certainty regarding the future of the company. The affected funds are Sterling Bond, High Yield Bond and UK Property.
New Star has announced that discussions are continuing with its bank syndicate. Whilst the New Star funds that are rated have not been amongst our highest conviction recommendations recently, we do not feel it is appropriate to maintain our ratings until the situation becomes clearer.
We stress that we are not recommending that existing investors sell the affected funds. The managers who run the above funds have, in the past, had an excellent track record, although they have suffered in current market conditions.
Investors should have no concerns regarding the safety of investments held within New Star funds. These do not form part of the company’s assets, are held in trust and cannot be used to meet any liability of the fund management company.
Nevertheless, we understand clients’ concern in this environment and alternatives we recommend to the above funds are: SWIP Property Trust, Invesco Perpetual Corporate Bond and M&G Optimal Income.
We will update our website as the situation develops. In the meantime, please contact Bestinvest if you would like to discuss any of your investments.
Update 5th December
Whilst it is good news for investors in New Star funds that the company has reached an agreement with the banks over the outstanding debt issues, there remain concerns over the corporate structure which need to be resolved before we can reinstate our recommendations. The main issue is whether they have put together a package of equity and preference shares that is good enough to keep key fund managers at the company.