INVESTORS have pulled more than £1.3 billion out of New Star’s funds over the past six months, punishing it for a poor performance that has seen many of its “star” fund managers slump towards the bottom of the performance tables.

John Duffield, the firm’s founder and chairman, said last week that he was “committed to doing whatever is necessary to address the problems”. This is being widely read as an indication that he will change the managers of some of the worst performing funds.

Heads have already begun to roll. Last week James Ridgewell, who only a few years ago was billed as one of “New Star’s new stars” in giant billboard and press adverts, was axed as the manager of the UK Special Situations fund.

The fund, which has fallen 23% over the past year, placing it 308 out of 309 funds in the All Companies sector, will be closed down at the end of next month if investors agree.

The £35m left in the fund will be rolled over into the UK Alpha fund managed by Tim Steer, which is down 4% over 12 months, according to data firm Morningstar. This makes it New Star’s second-best UK equity fund, just beaten by Hidden Value, run by highflying 29-year-old Jamie Allsopp, down 2%.

The run of poor results means that New Star’s shareholders are also feeling the pain. After peaking at 485p in July the shares plummeted 83% to a low of 82p last week. It finished the week at 101.25p, 55% lower than the 225p it was priced at when the group floated in November 2005.

The firm warned that it could take time before returns for shareholders improve. In a trading update it said: “We are not optimistic about the outlook for 2008. As a result both of depressed market conditions and the poor relative investment performance of some of our principal products in 2007, there may be further net outflows of assets, at least during the first half of 2008.”

Some advisers are losing patience with New Star’s performance, but others said it was too soon to pull out of the firm. Mark Dampier at Hargreaves Lansdown, an adviser, said: “Even the best fund managers have two to three-year periods of poor performance.”

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