The New Star Pan European Equity Fund is a pure stock-picking fund focussed on absolute rather than relative returns. Unlike other pan-European funds, it splits the investment region into two distinct blocs — Europe excluding the UK and the UK.

Daniel White, the lead fund manager, determines the weightings between the two regions. He works with Richard Pease, who is widely regarded as one of the most talented European fund managers, picking stocks in Europe excluding the UK. Stephen Whittaker, New Star’s joint chief investment officer, is responsible for stock selection within the UK portion.

New Star Asset Managers Limited are represented in Malta by Jesmond Mizzi Financial Services Limited and the Fund is marketed locally in terms of the UCITS directive.

Below, Daniel explains why the recent stockmarket weakness provided buying opportunities, and why valuations remain the key criterion for his portfolio holdings.

From a macro-economic outlook, the recent stockmarket weakness is no cause for alarm. Valuations are generally moderate and sentiment remains broadly positive. Obviously, there are potential concerns over a possible fall in US consumer confidence, resurgent inflation and further interest rate rises in the eurozone but the economic outlook is positive. From both a European excluding the UK and a UK perspective, the recent equity market correction therefore offers a buying opportunity rather than a cause for alarm.

Within the Europe excluding the UK portion, the New Star Pan-European Equity Fund has used the recent market weakness to top up existing holdings in attractively-valued larger companies. The fund focuses on companies that operate in niche markets or that can demonstrate a quality of product or service that is difficult to replicate. The fund tends to avoid commoditised product companies, favouring instead service sector firms, whose earnings are less correlated to erratic movements in commodity prices. This has offered some resilience as commodity prices have fallen back.

In the UK, Stephen is equally optimistic, seeing recent market weakness as a healthy correction within a longer-term bull market. This should not distract investors from the fact that most UK equities were, and continue to be, on reasonable valuations although it does act as a timely reminder of the need to focus on fundamental factors such as company valuations and the economic climate. Shares are getting rarer in terms of supply, the housing market is holding up and corporate profitability is generally in line with expectations. Indeed, Stephen believes it is not unrealistic to expect a fourth year in a row of double digit returns from the UK equity market.

The fund’s approach, above all, is to price purchases rather than time them, with a cheap valuation seen as a clear and reliable long-term catalyst. Most disposals made recently were for the right reasons — strong performance leading to full valuation.

Additions were made in a number of medium-sized French stocks with high cash flow yields.

This article has been issued by Jesmond Mizzi Financial Services Limited, which is licensed to conduct investment services business by the MFSA. Investors should remember that the value of investments can go down as well as up and past performance is no guarantee to future performance. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation. Full details of the Fund can be found in the Prospectus. Any investment decision must be made solely on the basis of the information contained in the Prospectus, which is available on request from Jesmond Mizzi Financial Services Limited, of 67/3 South Street Valletta or by calling them on 21224410.

NOTES TO EDITORS

New Star important facts:

·        New Star, one of the UK’s fastest growing fund management companies, was founded in June 2000 by John Duffield, previously the founder of Jupiter Asset Management, which he built into one of the most successful retail investment businesses in the UK.

·        New Star is expanding its international business in response to the growing demand from investors in Continental Europe. The aim is to become a leading mutual fund provider over the next few years, offering international investors the investment expertise of one of the fastest growing and most successful UK fund management groups.

·        New Star’s international strategy is to develop key partnerships in local markets.

·        New Star International’s website can be found at www.newstarint.com.

Past performance is not necessarily a guide to future performance. The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice.