When Andrew Formica ran Henderson's equities business, his mantra was “to invest in companies that whilst fundamentally sound are nevertheless underperforming”.

That New Star has been underperforming is without question.Whether it is “fundamentally sound” is the nature of the punt being taken by the 38-year-old Australian, who was only promoted to Henderson chief executive at the end of the summer.

The City appears to think Formica has bet wisely. Since word broke that Henderson would be New Star's rescuer, Henderson shares have leapt almost 50% including today's 10p jump to 72p.

Much of today's rise could be down to a Henderson trading statement that said funds under management are only down marginally — a right result given the recent carnage — and that it on track to make profits of £80 million this year, in line with or better than many City forecasts.

On the New Star deal, the analysts are equally bullish, saying the deal will bring in £50 million of relatively stable revenues and therefore, even after redundancy and reorganising costs, should immediately increase earnings by up to 30%.

Fund management is a sector that is consolidating as weaker performers are forced into the hands of those who have or can raise money.

But the City is littered with the histories of acquisitions where the assets can leave pretty quickly — either the stock-pickers taking their spreadsheets off elsewhere or the investors taking their money elsewhere. Many investors in New Star were backing John Duffield, and New Star under Henderson management comes ex-Duffield.

What New Star should bring is an immediate shot in the arm for Henderson earnings during difficult times. And, lo and behold, it should also be very nice for Formica, who can earn 600% of his basic salary, or a total of nearly £2.5 million, if Henderson has a good year...