Richard Wallis, deputy head of research and investment at Origen, gives his verdict on the Henderson New Star European Special Situations Fund.

Henderson New Star has recently launched its first fund since acquiring New Star earlier this year. The European Special Situations Fund will be managed by Richard Pease, who also runs the former New Star European Growth Fund. He
has 25 years’ investment experience and is widely regarded as one of the most talented European fund managers.

Richard Wallis says,
The new European Special Situations Fund will aim to provide long-term capital growth by investing in European (excluding UK) equities of companies in special situations. In the management of the fund, Pease will use his historically successful investment process that is set on the premise that value investing outperforms over the longer term.

Pease will apply his value-focused approach and seek to invest in high-quality companies that will primarily be in the small- and mid-cap area and are either unpopular or out of fashion, and that he believes are fundamentally robust and have the ability to outperform over the longer term. Pease will also look for turnaround or recovery situations, or those that might be potential takeover targets.

The fund is likely to be capped at around £500 million and will have a relatively concentrated portfolio consisting of around 35 to 55 stocks. Capping the fund will allow Pease the flexibility to move around the mid- and small-cap markets, where he believes that there continue to be good opportunities for long-term capital appreciation.

Pease previously managed Jupiter’s mainstream European fund and its European Special Situations fund, achieving strong returns during his tenure on both funds. He spent over ten years at Jupiter before joining New Star in July 2001, where he has enjoyed similarly impressive returns over the longer term.

Henderson New Star’s new fund is certainly an attractive possibility that should benefit from one of the leading European managers of recent times. By capping the fund, it should allow Pease to manage the portfolio without having to be concerned about excessive inflows and consequently having to look at larger stocks as opposed to his favoured mid- and small-cap markets.

Based on Pease’s strong historic track record in stockpicking within the European markets, this fund should provide an ideal opportunity to access this leading manager within a fund where he has the flexibility to take advantage of opportunities in the mid- and small-cap markets. It should be noted, however, that this fund should be viewed as a long-term investment and that investing in mid- and small-cap stocks can be volatile, particularly in falling markets.