Bonus millions at New Star to keep hold of key staff

New star Asset Management founder and chairman John Duffield today unveiled a multi-million-pound bonus scheme for his staff, which will run for the next five years, but said he would not benefit from it personally.

Duffield is reckoned to be worth about £400 million including his stake in New Star and one of its larger funds, and the £185 million he made when he sold fund-management business Jupiter to Commerzbank.

New Star's funds have seriously underperformed recently. Its own share price has fallen by 72% in the last 12 months to today's 133¾p.

But Duffield today said it was vital the firm held on to key staff at a time when the volatility in the world's financial markets creates more opportunities for people to move to firms that might look more attractive.

"We believe it is important to ensure the interests of key employees are closely aligned with those of all shareholders, and to make sure those shareholders are locked in," he added.

New Star is to issue 35 million new shares, currently worth £46 million. They will over time be allocated to 35 of its top people. These are likely to include fund managers such as Patrick Evershed. Stephen Whittaker, Toby Thompson and Roger Dossett. But neither Duffield nor his chief executive, Howard Covington, will be part of the scheme.

Fund managers will be set targets to achieve their full share award while other executives will be rewarded according to operating profits. These have to hit £70 million for any reward and a target of £120 million for the top reward. Operating profits were £98 million last year, but are expected to halve this year.

There will also be a £5 million-10 million cash bonus scheme, aimed largely at staff not in the share bonus pool. External holders of 31% of the shares have given the nod to the new scheme. Staff hold 29% of the equity, making it certain to be approved.