Fund Objective

To achieve long-term capital growth.

View on Past Performance

The New Star European Leaders Fund fell 15.3%* in September while the FTSE Eurofirst 300 excluding UK Total Return Index lost 12.8%*. In an unusually volatile market, the defensive sectors, consumer staples, telecommunications and healthcare performed best. Materials was the weakest sector as commodity prices retreated and concerns of a global economic slowdown intensified.Within the fund, Arcandor was the biggest underperformer due to concerns that it would be forced to sell its better quality assets at low prices to secure its refinancing. Yara, the fertiliser producer, was another poor performer, shedding 43.8% over the month. Its share price tracks agricultural commodity prices, which fell significantly. Industrial stocks suffered as global economic growth slowed, hitting Gea Group whose shares lost 36.6% over the month.Insurance stocks, however, performed relatively well, benefiting from stronger balance sheets than those of the banks. Zurich Financial and AXA, which are both in the fund, gained 6.3% and 2.2% respectively. Unilever rose 2.9% as investors sought the protection of consumer staples.After the bail-outs of Fannie Mae and Freddie Mac, the positions in Alpha Bank, Credit Suisse, Deutsche Bank and UniCredit were increased. These purchases were funded by the sales of PPR and Sanofi-Aventis. Yara was also topped up. It was an extraordinary month in which it became clear that many highly-leveraged financial institutions were in exceptionally weak positions.

Future Expectations

A painful deleveraging process will have to take place and this will have significant consequences for the global economy. The only respite is that regulators are uniting to combat these problems.

Fund Details