New Star Asset Management axed its top fund manager today as it fights to turn around an awful performance and keep the business alive.

The company, led by chairman John Duffield, is parting company with chief investment officer Stephen Whittaker with immediate effect.

The move represents a dramatic fall from grace for Whittaker, previously regarded as one of the most successful fund managers of his generation.

New Star's shares are down nearly 90% since the start of the year. It has been buffeted by the turmoil in stock markets and by a fund performance even worse than industry rivals'.

Duffield acted to stem the losses by ousting Whittaker and shaking up the firm's funds, some of which will be closed or merged.

The chairman said: "We are moving swiftly to restructure our fund management activities in response to the bear market and to specific areas of underperformance. I recognise that we have been too slow in some of our funds in adjusting to the sustained falls in securities markets."

Whittaker's replacement is not yet decided, though Trevor Green will take on his responsibilities in charge of the UK Growth Fund. New Star said it is in talks with several candidates to become the new CIO.

Last week New Star began a cost-saving regime aimed at slashing £20 million from its top line. Up to 60 jobs could go.

Bid rumours circulate, though no candidates have come forward publicly.