UK - The £673m (€811m) New Star International Property fund has been forced to temporarily suspended dealings following an increase in redemptions from institutional clients.
The rise in redemptions from a few institutional clients, caused by a deterioration in market conditions and investor sentiment, has greatly affected the fund's liquidity and forced New Star Asset Management and the Royal Bank of Scotland, the fund's depositary, to suspend dealings in the fund for 28 days initially until further notice.
"It is with great reluctance that New Star has temporarily suspended dealing in the New Star International Property Fund. The fund has demonstrated that a portfolio such as this has valuable diversification benefits in difficult times. The fund's focus on diverse asset quality has the potential to deliver strong long-term returns to investors," said Stuart Webster, head of global property for New Star.
The UK-based asset manager, which at September 30 2008 had approximately £16.7bn in funds under management, said the suspension was designed to restore enough liquidity to the fund for it to meet redemptions once it re-opened.
However, officials are unsure how long the suspension will last given the current state of the real estate market although they say they are "committed to achieving fair value for all investors when disposing assets in the turbulent market".
The New Star International Property Fund was launched in June 2007 at pretty much the top of the market but officials claimed it this had week recorded a gross income yield of 4.2% and had fallen 9.2% compared with the 39.9% drop on the FTSE All-Share Total Return Index and a 34.4% drop on the MSCI World Total Return Index.
The Fund is designed to hold 75-80% of its assets in physical property and has since launch made acquisitions in Europe, Asia and Australia.
New Star said the fund's net income would be paid during the suspension period albeit officials are consulting the fund's trustees and the Financial Services Authority, the UK financial services regulator, to extend the suspension beyond the 28-day maximum.
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