John Duffield, the chairman of New Star Asset Management, made the first cut in his £20 million-a-year cost-savings drive yesterday as he forced out Stephen Whittaker, his joint chief investment officer and a 28-year veteran of fund management.

New Star said that Mr Whittaker, who had been at the fund manager since July 2002, had left with immediate effect. “John asked Stephen to leave after a prolonged period of underperformance,” a New Star spokesman said.

New Star’s £343 million UK Growth Fund, which was managed by Mr Whittaker, fell by 16.5 per cent in September, according to the latest statistics. It will be merged with another fund and managed by Trevor Green, of New Star. New Star declined to comment on whether Mr Whittaker had collected a redundancy payout.

Gregor Logan, New Star’s other joint investment chief, is staying on.

The fund manager said that it had started to look for a replacement for Mr Whittaker, who cut his teeth at Invesco Perpetual. It has already begun talks with potential successors.

Several well-known managers, including Tim Steer, who runs the £369 million UK Alpha Fund and a hedge fund, were promoted as part of the reshuffle. A total of six funds were merged into three. Mr Whittaker was the only manager to exit yesterday, but it is likely that dozens more will follow him in the coming weeks.

Mr Duffield said that the changes were in direct response to the bear market for equities and were aimed at addressing specific areas where funds were not performing well enough. “I recognise that we have been too slow in some of our funds in adjusting to the sustained falls in securities markets,” he said.

It emerged late last week that between 50 and 60 jobs would go at New Star as the fund manager wrestled with sliding equity markets and investors withdrawing capital.

The cuts at New Star, which has moved to sublet commercial office space and has renegotiated its banking covenants, will mean that up to 15 per cent of staff will lose their jobs.

The Times reported yesterday that up to 4,000 fund management jobs could be lost by the end of the first quarter next year as struggling investment firms take the razor to costs.

New Star’s shares fell 1p, or 4 per cent, to 23¼p.

Speculation has grown recently that New Star may need a rights issue. It is also seen as a takeover target.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts