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18 Jan, 2008


Published: 09:36 Friday 18 January 2008

By: Matthew Goodburn, Investment Correspondent

Shares in New Star Asset Management have plummeted after it warned that the credit crunch would impact 2007 profits and 2008 profits would be 'significantly lower' than originally planned.

At 8.33am the shares (NSAM) plummeted as low as 82p, a fall of over 44% from yesterday's close, before rising slightly. At 9.10am they were trading at 91p.

The shocking trading update said the second half of 2007 had seen net fund outflows of £500 million, compared to net inflows of £2.3 billion in the first six months of the year.

Last April New Star (NSAM) said it would issue a total dividend for 2007 of 9p but the figure has now been revised to just 1p per share making a total dividend for the year of just 5p.

In its statement New Star said: 'We are not optimistic about the outlook for 2008. As a result both of depressed market conditions and poor relative investment performance on some of our principal products in 2007, there may be further net outflows of assets, at least during the first half of 2008.'

Commenting on the gloomy update, Chairman John Duffield said: 'We have a number of issues to address in the current year. We are committed to doing whatever is necessary to address the problems we have experienced with investment performance in certain of our products.'

This has been widely read as an indication that he will change managers on part of the underperforming UK equity fund range. This could include moving joint chief investment officer Stephen Whittaker off his income mandate or removing Patrick Evershed from his opportunities fund.

The company also announced it would look to replace its employee share incentive scheme which currently locks staff in until 2009. This is intended to lock-in key fund managers and avoid losing any more managers after the departure of fixed income head Theo Zemek last

       
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