New Star, the troubled fund group, has been forced to wind up its ground-breaking Heart of Africa Fund. A New Star spokeswoman said a flood of redemptions had left the managers with a growing concentration of illiquid stocks and it was felt that to continue with this illiquid portfolio would be unfair to remaining investors.

Dealings in the £30 million fund had already been suspended in December and, following the winding-up decision, New Star said it intends to invite bids for the fund’s entire portfolio, with the aim of selling it in one go rather than in bits and pieces.

Jamie Allsopp, manager of the Heart of Africa Fund, said: “We regret having to take this action and realise that this is a disappointing outcome for investors. However we believe the the winding-up of the fund is the best means by which we can restore investors’ access to their money.”

The fund was launched in November 2007 and was one of a tiny handful to invest in the continent of Africa. It rose by 10 per cent in value in the first six months of its life. But as the global downturn gathered pace in the second half of 2008, the fund’s price dropped sharply and it has now halved in value since launch.

Adrian Lowcock, Senior Investment Adviser at Bestinvest, the independent financial adviser, said: “The closure of the New Star Heart of Africa Fund is disappointing for existing investors. This highlights the risks of investing in specialist funds operating in new sectors. We decided not recommended this fund to our clients, preferring to concentrate on sectors where managers had identifiable track records and a more diversified approach to investing.”

The New Star fund group is in the process of being acquired by Henderson Group.

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