New star's latest fund, the Strategic Government Bond Fund, is being promoted and sold in Malta at a time when it is just now being offered internationally.
"We wanted the local investor to come in at the beginning," Jesmond Mizzi, chairman and managing director of Jesmond Mizzi Financial Services (JMFS) Ltd, told The Sunday Times last week.
This offering marks the first collaboration between JMFS and New Star, with more funds and investment products to be offered to local investors in the future.
Although this is a fund that may be more suitable in the current market climate, Peter Goldsmith, managing director of New Star International Investment Products Ltd, said this is a fund that is not necessarily just for the cautious investor.
"I am a great believer that everybody should have a wide spread of investments in their portfolio," he added. This should include cash, equities and bonds.
"I've been in this business for 34 years. I've seen every sort of market condition. Investors should generally invest for the longer term because they often get very worried about short term market movements and we've had for the past couple of years very poor equity markets.
"But, if we look back 50 years this is nothing unusual. We have had cycles like this."
Mr Goldsmith, who was on his first visit to Malta, termed it "an unusual bond fund because it will invest in a wide array of government bonds only. It will invest in US and G7 government bonds, secured AAA and AA bonds, but it will also invest in emerging market government bonds and the aim is to switch between the two."
Another factor is that the fund aims to pay a target of 5% per annum income - about 0.4% per month, provided it is a minimum of $150 a month. Although Mr Mizzi pointed out that there were already funds in Malta that pay monthly, Mr Goldsmith said not many did this internationally.
We briefly discussed the balance between yield and risk and Mr Goldsmith made the point: "There is an awful lot of misinformation out there. You mention emerging markets and everyone thinks first of all of stock markets and they think of Argentina, which is a particularly sore point here.
"But in fact, if you look at the list of defaults since 1985, it's very small. Most of them were cured and the one thing I would say is certainly we would never have all our eggs in one basket.
"I personally would never recommend anyone to go into a single country's bonds, even if it's their own country. I wouldn't recommend people just to have a portfolio of UK or Irish government bonds. I would recommend people to have a wide portfolio..."
Mr Goldsmith said the lowest grade of emerging market debt would be BBB to B. "The only reason we would have CCC is if something was going to be upgraded in their credit rating. Anything that drops from B to CCC in the normal course of business we would get rid of."
Asked for his view of the fund business, Mr Goldsmith said the equity business had taken a hammering in the past two years. "People have moved from equities to buying bond funds, fixed interest funds, income funds, other sorts of more secure funds," he observed.
"In general, globally, the fund industry is probably in net redemption, not net sales. As it happens, at New Star we are in net sales. We are one of the few companies that is.
"We took quite a large slice of the sales net redemptions - something in the region of 10% - over the past 12-18 months. Many people are not, and that is largely because of the New Star story. But, it's a tough time."
Going on to give some background on New Star, the company was set up in June 2000 by John Duffield, who had previously founded Jupiter Asset Management. He sold Jupiter to Commerzbank and New Star now has $6 billion under management, 500,000 clients, 170 staff and 35 fund managers.
The company had the largest ever amount raised by a new unit trust in July 2001, when they raised about $350 million in three weeks in the UK. They also launched the first guaranteed (by HSBC) hedge fund, which raised $180 million, the biggest ever single-manager hedge fund.
New Star is still in the market for acquisitions, so long Mr Goldsmith pointed out, as the assents were sensible valued. It will also continue to grow by natural growth.
He sees two avenues for growth in Malta. "The first avenue is our funds. We've got authorisation from the MFSA for this fund. We are now registering the fund and we will have it listed. We are also going to add three equity funds. Obviously, equities haven't died for ever.
"Equities have already bounced back a reasonable amount from their lows and I perceive that the public, if this slow movement upwards continues, will slowly return to buying equities, which is the right thing to do. There's no question. Unfortunately, it is just psychology."
Malta, Mr Goldsmith pointed out, was ahead of Hong Kong in terms of its regulator's efficiency. "The MFSA were very helpful, much more that I could have every imagined - for a small island, a very advanced and good regulator."
The second avenue is the development of the pension fund business, once the regulations have been finalised by the authorities. Mr Goldsmith has direct experience, having worked with an insurance company in the UK.
"I know the sort of products people need. This is new to all companies and one needs to make it as simple as humanly possible. It should be no more difficult for them - or not much more difficult for them - than filling in an application for a unit trust or for whatever it is.
"I believe that the people who will have the difficult work will be the trustees and those people can do all that work in the background and hand in hand with a fund management house like us.
"We will do more research to see if we could find a suitable strategic partner here in Malta to, jointly, go after this market, whether it is this year or next year. It will happen at some stage. I'd like to be ready to have something available and to help companies have the least burden possible to give the maximum benefit to their local employees."
Mr Mizzi is looking forward to working with New Star. "We did a lot of research. We were looking for high-fliers, star performing managers, and obviously New Star was a company we thought we could do business with and bring to Malta because not many people at this point, I would say, are looking for new business."
New Star also took a strategic business decision to seek a local partner, following a recommendation from its regional director for Europe and the Middle East, David von Niedel, and several of its senior managers who did business in Malta in the past.
As for Mr Goldsmith, he is glad to have discovered Malta, although he admitted he would not have thought of us "in a million years". The Anglo-Saxon model was a major attraction and things can only get better.