Dear Client
You may have read press comment recently about the fall in New Star's share price and have, no doubt, seen the dramatic fluctuations in stockmarkets over the last few days. We think it important to make a couple of key points about New Star's business, some of which were not clearly reported in the newspapers.
The environment for investment markets generally has deteriorated over the last six months following the "credit crunch" and concerns about a significant economic slowdown. Since the start of 2008 investor sentiment has taken a further turn for the worse. As an asset manager whose income is derived primarily from the value of our funds under management this change in sentiment, particularly over the short term, has affected the shares of New Star and many other investment groups.
Against this backdrop, the relative performance of some of New Star's largest equity funds has been poor. This is because they have been invested in so-called "value" stocks, including cyclical stocks and shares with a high degree of interest-rate sensitivity. The investment in "value" stocks has worked in our favour over the longer term but this approach has generated underperformance over the last twelve months. There are perhaps parallels with 1998-99 when a similar situation occurred and growth/technology stocks performed strongly before the dotcom bubble burst in early 2000.
As one of the leading providers of retail property funds, New Star has also suffered due to the sharp downturn in the UK commercial property market, again as a function of the "credit crunch" and influenced by the lack of availability of credit for potential property buyers.
Despite this challenging climate and although our operating profits* are expected to be significantly lower this year, our business remains strong. We can obviously do nothing to alter the general investment climate but we are absolutely focussed on addressing those problems that are under our control, such as the poor performance of some key equity funds.
We believe in prudent business management. This belief has led us to be very open with our clients and the public generally about the prospects for the company both in our interim statement in October and in our trading statement of 18 January 2008. We are a listed company whose performance is publicly available.
In addition, prudent business management has led us to build a strong business, which provides diverse investment products to various types of client across the world. We manage equities, bonds, property, funds of funds and hedge funds. All of these are further diversified geographically and run by different investment managers. These products are provided to retail and institutional investors in a number of countries.
Our management team has a long track record of running successful investment management companies and we are confident that we will navigate these "choppier" economic waters. Our twin priorities remain the same, namely to provide a combination of strong investment results and good service. To this end, please do not hesitate to contact us should you have any queries or require any further information.
Yours faithfully
Simon Hillenbrand
Managing Director
UK Sales
Disclaimer
*Profit before taxation, interest, exceptional items and amortisation of intangibles.
The opinions expressed here are the author's at the time of production and should not be interpreted as investment advice. If you have any doubts over the suitability of an investment please contact a financial adviser.
New Star Asset Management Limited is not authorised to give investment advice and only provides information on New Star Group's products. For your protection, calls are recorded and may be monitored. Issued in the UK by New Star Asset Management Limited. Registered in England and Wales Number 3984658. Registered at 1 Knightsbridge Green, London SW1X 7NE. Authorised and regulated by the Financial Services Authority.
The value of investments and any income from them may fall as well as rise and may also increase or decrease as a result of changes in the exchange rate between currencies. Investors may not get back the amount originally invested.
Past performance is not necessarily a guide to future performance.
