The New Star Tri-Star Unit Trust rose 0.1%# during May while the IMA Cautious Managed sector gained 0.2%#. The equity portion performed well, the bond segment was flat and the property exposure through the New Star UK Property Unit Trust fell slightly. Energy prices firmed further and data showed inflation rising. Oil prices reached record highs before retreating towards the month end, helping the fund's holdings in both Venture Production and Premier Oil to rise 18% and 11.5%respectively. Meanwhile, BHP Billiton gained 6.3%. Partial profits were taken in the major mining companies after their significant out-performance so far this year. May was the second successive month of positive total returns for the European high-yield corporate bond market despite rising gilt yields. A number of factors contributed to this recovery: equity raising by banks to shore up balance sheets, improved supply and demand dynamics in the high-yield market, with no new issues for 10 monthsand a gradually eroding loan overhang. Negative factors, however, remain: earnings visibility is poor, default rates are creeping higher and technical pressures persist. Despite nervousness about occupancy and tenant demand, the New Star UK Property Unit Trust enjoyed significant success in May in letting its relatively small amount of vacant space. Within the context of the economic growth slowdown, the fund's focus remains on the financial health of tenants. In this context, it is reassuring thatapproximately 84% of its income is derived from banks, government and blue-chip companies classified by Dun & Bradstreet as being at minimal risk of failure.
