The ratings agency revealed it had downgraded the €999m fund on Tuesday claiming the lower rating “provides a better reflection of our confidence in the fund’s relative merits”.
The fund consists of around 200 stocks and has been managed by Colin Stone since its launch in 1995.
While Morningstar analyst Muna Abu-Habsa said she continued to “think well” of Stone, she had doubts over the effectiveness of the set up where manager Jim Maun runs a ‘sleeve’ of 23% of the portfolio, and Richard Tennant a sleeve of 12%.
Abu-Habsa said: “The structure of combining three separate portfolios is not ideal, in our opinion, as it leaves the managers having to pick up small victories in individual positions, with small position sizes making it challenging to add significant alpha.”
She added that the fund’s AUM and number of holdings were among the highest in the Morningstar Europe Small Cap Equity category.
“Although we continue to think very well of Stone and give him credit for delivering competitive results for investors here over the last twenty years, we believe a Bronze rating provides a better reflection of our confidence in the fund’s relative merits,” she said.
