New Star, the troubled United Kingdom fund manager which handles £25 billion (Dh180bn) of assets worldwide, is in talks with UAE-registered banks and life assurance companies about developing Islamic funds with a “global appeal”.
The London-listed firm, which has been hit hard by recent turbulence in the financial and commercial property markets, is expected to announce a tie-up with a locally-registered financial firm this quarter, in a deal that will allow it to transform at least one of its existing funds into a Shariah-compliant investment vehicle.
“It will unite our asset management with someone else’s expertise in Shariah finance,” James Tothill, Director of International Partnerships at New Star Investment Funds, told Emirates Business. “It will give us distribution potential within the region and beyond: I see it having global appeal.”
Tothill declined to name the New Star fund that would be modified under Shariah principles or which of the firm’s local partners would distribute it, saying only that “some funds would lend themselves more closely to Shariah compliance”.
However, one contender would be the New Star International Property Fund, which – as it is based on ‘tangible assets’ – is more suited to the Islamic model of investment. According to Tothill, the fund currently controls assets worth £630 million, 80 per cent of which are held in Asia, making the fund arguably more resilient to the fallout from the United States sub-prime crisis.
New Star does not market its products directly in the UAE and works with a number of locally-registered financial institutions including Skandia, Zurich International and Friends Provident. The prospect of New Star establishing a UAE presence under its own name is something the company “will review over time”, said Tothill.
New Star is run by City heavyweight John Duffield, who is known for his colourful language in business dealings, having famously called executives at Germany’s Commerzbank “Nazis”.
Earlier this year, New Star issued a profits warning, slashed its dividend, and admitted that many of its funds were underperforming. Its share price has plummeted by 74 per cent in the past six months, prompting speculation of a takeover of the group by a private equity or investment firm.
Potential buyers could include private equity group Candover, Apax Partners, or US firm JC Flowers. Hellman & Friedman and Aberdeen Asset Management have also been named as possible bidders. However, although Tothill admits that New Star has experienced “a tough year”, he ruled out a takeover. “The ownership of the company means that it’s not an option: too much of it is owned by staff,” he said.
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