Shares in fund manager New Star Asset Management, which runs the UK’s most high profile private investor property fund, plummeted this morning, after it slashed its dividend by almost half because of tough market conditions.
In a second-half trading update to the Stock Exchange, New Star said it had decided to cut its final dividend for the 2007 from 9p to 5p, given ‘the current uncertainties faced by New Star and the desire to maintain its financial position’.
Its shares dropped 37.5% to 88p in early trading.
‘We are not optimistic about the outlook for 2008,’ New Star said. ‘As a result both of depressed market conditions and the poor relative investment performance of some of our principal products in 2007, there may be further net outflows of assets, at least during the first half of 2008. As a consequence, operating profits are expected to be significantly lower in 2008 than in 2007.’
‘We have a number of issues to address in the current year,’ New Star chairman John Duffield said. ‘We are committed to doing whatever is necessary to address the problems we have experienced with investment performance in certain of our products.’
New Star said it had suffered from the sharp downturn in the UK commercial property market. In December, it said the value of its £1.8bn UK property trust had fallen almost 18% due to a decline in sentiment surrounding UK property.
Across its funds, which also invest in fixed income, equities and money markets, New Star saw net outflows of £500m, compared to inflows of £2.3bn in the first half.