New Star has suspended trading on its Heart of Africa fund, less than a month after it halted trading on its International Property fund. The Africa fund is managed by Jamie Allsopp.
The group has applied for a 28-day freeze on the GBP 29m vehicle because of liquidity problems, especially in Nigeria and Ghana.
“This has happened due to a combination of factors reducing liquidity. It is not a structural issue,” Allsopp says.
The general election in Ghana, where 21% of the fund is invested, has caused liquidity to dry up in the market. “As in the Kenyan general election in 2007, liquidity becomes constrained as people await the outcome,” says Allsopp. “This is what has happened in Ghana. When the results of the election are known, I believe liquidity will come back into the market.”
Stockmarket closures owing to religious holidays have also affected daily dealing in the fund, causing Allsopp to struggle to meet redemptions. In Nigeria, where the fund is 30% invested, restricted foreign exchange flows delayed $6.2m (GBP 4.2m) in cash owed for stocks the manager had sold.
He denies rumours that the problems are because of holdings in particularly illiquid stocks. “All my holdings are listed equities except 1% of the portfolio, which is in pre-IPO [initial public offering] stocks in the UK,” he says.
At the peak of its popularity Heart of Africa had about GBP 80m in assets under management. This had fallen to GBP55m by November.
Meanwhile, New Star’s announcement last week of third party interest in the business did little to stem the bad news for the firm. In a tumultuous seven days Laurent Auchlin, head of fund research at Lombard Odier Darier Hentsch, the biggest single investor in Richard Pease’s offshore New Star European Growth fund, withdrew his cash from the fund.