According to Daniel Vaughan, senior manager research analyst at Morningstar, recent performance issues, the high fee hurdle and a change in the portfolio’s market cap composition have lowered its conviction in the fund.
However, he added, there remain a number of positives for the fund, including: the longevity of Nimmo’s tenure, the consistency with which the fund’s quality growth approach has been applied and its long-term track record.
Nimmo has run the fund since its launch in January 1997 and has, over that time generated a return of 833% according to FE Analytics data.
Over three months, six months and one year, the fund is first quartile generating a returnof 7.8%, 15% and 21% respectively, compared to sector returns of 4.7%, 12.1% and 14.6%.
However, over three years the fund is fourth quartile, with a return of 60.5% compared to the sector return of 68% and over five years, it has returned 107%, compared to 114% for the sector.
Standard Life Investments, when asked for a comment on the downgrade said: ““We remain confident in our investment process, unchanged since the launch of the Fund in January 1997. Four distinct economic cycles encountered over that 18-year period have seasoned this process and the Fund has returned a compound annual growth rate of 14.15%.”
It added: “The UK Smaller Companies Fund has performed well over the last year, generating a 23.8% return (Financial Express, Inst Acc, 11/8/2014 to 11/8/2015). This performance means the Fund has more than recovered the ground it lost during the second quarter of last year, closing at a new high point in the process.”
