August and Rutland trusts merge to create New Star FoF

August Equity and Rutland Partners are relinquishing control of their listed trusts to New Star Asset Management, as the UK-based group looks to invest in private equity through a new fund of funds vehicle.

UK-based New Star Asset Management has moved into private equity for the first time, merging August Equity Trust and Rutland Trust to create a new fund of funds vehicle.

The vehicle, which will be called New Star Private Equity Investment Trust, will invest mainly in mid-market buyout funds in the UK and Europe, and also in listed private equity vehicles in the region.

Both August and Rutland are handing over the management of their listed trusts as they look to concentrate on investing their closed-end buyout funds. August said in November that it was examining strategic options for the trust, after coming under pressure from existing shareholders to realise value.

August Equity Trust was a major investor in August’s debut fund as an independent entity, and also co-invested alongside the fund on specific deals. Rutland Trust operated in a similar way, committing £100 million to the Rutland Partners buyout fund and also doing direct investments.

However, NSPEIT, the combined entity, will operate as a standard fund of funds vehicle, investing in a diversified portfolio of mid-market European buyout funds. It will have an initial portfolio worth about £90 million, which will include the current fund investments in August and Rutland, plus about £13 million of other fund commitments. It will also contain some existing New Star investments in listed private equity vehicles. Paul Craig of New Star, who has generated an annual return of 21.7 percent from this part of the asset manager’s portfolio since 2003, will manage the new vehicle.

NSPEIT plans to invest its current portfolio as quickly as possible after the vehicle is approved by existing August and Rutland shareholders – likely to happen at the end of June – to avoid a cash drag effect.