New Star: Investors’ questions answered
Beleaguered fund management group New Star Asset Management is locked in talks with its lenders over the group's £230m of debt after its shares fell back to an all-time low.
The situation has raised fears that investors may look for a quick exit from New Star funds. Already assets under management at the group have fallen to £14.3bn last month from £19.8bn at the end of June.
Just last week, trading in the New Star's International Property fund was suspended in a bid to halt a Northern Rock-style run on assets - meaning that investors in the fund could not withdraw money for the time being.
This is Money answers your questions.
What's happening at the group?
New Star had a request to suspend its shares from trading refused after collapsing to an all-time low. By mid-morning trading on December 1, the shares were at 5½p - a 77% fall over the past week and a 98% collapse over the last 12 months.
The firm has been battered by the financial meltdown and the carnage across the wider economy, brought on by the relentless credit crunch, the collapse in property prices and high levels of debt.
New Star boss, John Duffield said that the group was in 'advanced and constructive discussions' over its crippling £230m mountain of debt.
Any deal reached with the group's lenders is likely to conclude in a situation that would see the banks, including Lloyds TSB, Royal Bank of Scotland, HBOS and HSBC, take control.
What would this mean for shareholders?
Shareholders would see their stakes diluted with such an agreement.
What about those with money invested in New Star funds?
Investors with money in New Star funds should remain calm. Their investment is ring-fenced, as cash held within FSA regulated investment funds is locked in and protected by a board of trustees, in other words, New Star's creditors cannot touch it. As Adrian Lowcock, senior investment adviser at Bestinvest, an independent financial adviser comments: 'The range of funds that New Star run do not form part of the company's assets. They are owned by the clients and are independent from the business assets.'
Can I get my cash out of New Star funds?
Yes. It is possible to cash in your investment if you wish, with the New Star International Property fund being the only exception. In terms of the also popular, UK Property fund, it is being priced on a bid basis, meaning clients selling the fund will receive a lower price than would normally be the case.