Significant changes made to the £56m New Star Global Equity and £11m New Star North American funds have heralded a significant upturn in their performance. Greg Kerr, former head of global equities at M&G, took over the funds from Mark Beale in June and May respectively.
Both funds were acquired by New Star from Edinburgh Fund Managers on October 31, 2003, and both were ranked fourth-quartile in their respective sectors when Kerr took over.
According to statistics from Lipper, from October 31, 2003, to May 5, 2006, (when Kerr took over) the North American fund was ranked 70th out of 92 funds in the IMA North America sector.
Meanwhile, from October 31, 2003, to June 30, 2006, (when Kerr took over) the Global Equity fund was ranked 138th out of 189 funds in the IMA Global Equity sector.
For the period from when Kerr took over to December 7, 2006, both funds are in first-quartile of their respective peer groups.
Kerr (pictured) says: “The key changes I made to the Global Equity fund were to manage it in a more concentrated way and make it have a more truly global view. As such, in the first month I cut down the number of holdings in the portfolio from about 120 to 80.”
Prior to taking over the Global Equity fund, Kerr says, the portfolio was managed so that all the ideas came from the group’s regional desks. “It ended up that the European desk was picking the Europe stocks, the Japan desk was picking Japan’s and so on,” he explains.
“What this meant was that in the end the portfolio resembled five sub-funds for each regional bloc: America, Asia, Europe, Japan and the UK. Instead we used modern techniques to industrialise the stockpicking process so that the fund looks for the best stocks in any given industry worldwide.”
Kerr has also concentrated the number of holdings in the North American fund, cutting the portfolio down from about 90 stocks to 70.
Kerr admits to being nervous on the short-term prospects for the world’s largest market. He says: “There will be a time over the next 12 months when investors will wish they had sold their US shares as the market is set for a correction. However, if you are a long-term investor, equities are still more attractive than most other asset classes.”