New Star mulls offer for NM Rothschild unit

New Star, the asset management firm run by the charismatic fund manager John Duffield, is mulling a bid for the investment management business of rival NM Rothschild.

Mr Duffield has been on the acquisition path but previous deals with firms such as Artemis have fallen through.

It is understood that the acquisition of Rothschild's investment management business looks more hopeful because close ties exist between the two sides.

John Craig and James Roe, who sit on the boards of New Star investment trusts, were also senior directors at NM Rothschilds in the 1980s.

It is understood that Mr Duffield hopes the two would put his case persuasively to Sir Evelyn de Rothschild, the chairman of NM Rothschild, because he has known them for sometime. Mr Craig and Mr Roe were also directors of Jupiter, which was founded by Mr Duffield, before they resigned in protest when its new owner, Commerzbank, fired him in 2000.

New Star has been one of the few fund managers to attract significant amounts of new funds in the tough stock market conditions of the last year, but it is keen to grow by acquisition as well as organic growth.

Rothschild Asset Management is much bigger than New Star, managing £12bn of assets. Last year it lost £7m on an income of £44m. New Star lost £7m on an income of £17.5m and has overheads in terms of fund managers and other staff who were taken on to manage a much larger set of assets.

Those close to the situation say talks are at an early stage and could founder. This is partly because of the difficult climate for selling asset management businesses. Owners are not keen to agree to sell at the current subdued prices.

The situation is also difficult because Rothschild is understood to be very wary about Mr Duffield talking the potential deal up in public and may pull out if too many advance details appear in newspapers.