Run by well-known duo Rob Burdett and Gary Potter, the F&C MM Navigator Boutiques fund and the F&C MM Navigator Progressive fund have both lost their bronze ratings and are now rated only neutral by the agency.
The high charges for each fund meant they “stand out” in a market where pricing has come under continual downward pressure, analyst Randal Goldsmith said.
The Boutiques fund lists an ongoing charge fee of 1.89% and an annual charge of 0.75% and the progressive fund charges an OCF of 1.79% on top of a 0.75% annual charge.
Goldsmith said: “We have a high regard for Gary Potter and Rob Burdett and their stable team.
“We also believe they are adept at uncovering new managers who are showing potential.
“They aim to add value from asset allocation decisions, but with the high equity weighting in these mandates, we believe this is difficult to achieve.”
The “fee drag” would be a tough hurdle to jump in order to outperform in the future, Goldsmith added.
However, BMO Global Asset Management hit back at the “disappointing” downgrade, claiming multi-manager funds charged more but offered greater diversification benefits.
In a statement, BMO GAM said cost is “just one factor” that should be considered when assessing funds.
“Ultimately it should be about value for money for investors. Failing to do so could lead to investors overlooking multi-manager funds, which could be to the detriment of generating investment returns,” they said.
A spokesperson added: “We are disappointed by Morningstar’s decision to downgrade these two funds.
“The funds have delivered strong performance with the F&C MM Navigator Progressive fund first quartile over five years and the F&C MM Navigator Boutique second quartile over five years.”
Morningstar also downgraded the Henderson Horizon Pan European Equity fund which slipped from a silver badge to a bronze.
Similar to the F&C case, analyst Peter Brunt believed the charges on the Henderson fund were too high and placed the fund and its manager Tim Stevenson at a “structural disadvantage”.
