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New Star to close Heart of Africa Fund two months after suspension

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New Star Asset Management is to close its Heart of Africa fund managed by Jamie Allsopp, two months after the fund was suspended.

New Star Asset Management is to close its Heart of Africa fund managed by Jamie Allsopp, two months after the fund was suspended.

The fund, launched in November 2007, lost 30 per cent of its investors’ money before the closure, which New Star says is down to lack of liquidity in sub-Saharan African markets.

The fund was valued at GBP29m when it was suspended in early December.

The firm said at the time: ‘While prospects for companies in the sub-Saharan region remain strong, the impact of the credit crunch and the knock-on effect on global stock markets has resulted in an increase in redemptions from investors.

‘This has coincided with a number of events that have caused liquidity in the sub-Saharan markets to weaken. New Star, with agreement from the fund’s depositary, Royal Bank of Scotland, has therefore reluctantly decided to temporarily suspend dealing in the New Star Heart of Africa Fund until further notice.

‘Events in Nigeria and Ghana have had a particular impact on the fund’s liquidity position. In Nigeria, where the fund is approximately 30 per cent invested, the repatriation of monies received from selling securities has been delayed by restricted foreign exchange flows. At 11 December 2008 the fund had some USD6.2m of proceeds from disposals awaiting repatriation from Nigeria.

‘Similarly, in Ghana, where the fund is approximately 21 per cent invested, the market has been less liquid than normal. Trading volumes have been lighter as a result of the uncertainty ahead of the general election. The close election result registered on 11 December 2008 means there will need to be an electoral run-off, which could potentially delay the resumption of normal trading.’

New Star said the temporary suspension of dealing was designed to restore sufficient liquidity to the fund for it to meet redemptions once it re-opened for dealing and that the period of suspension should last for no more than 28 days.

Since then, New Star has been effectively taken over by its banks after being unable to refinance its debts and is in the process of being sold to Henderson Global Investors.

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