The ratings agency called out the UK Smaller Companies fund and closed-ended JPMorgan Smaller Companies Ord – co-managed by Georgina Brittain (pictured) and Katen Patel – for underperforming the Morningstar UK Small-Cap Equity benchmark on average over a five to 10-year period.
The £130.7m UK Smaller Companies fund has massively lagged behind the IA UK Smaller Companies benchmark consistently over a five-year time horizon, according to data from FE.
The analysts cited doubts over the effectiveness of the duo’s behavioural finance quant model as the reason for the bump down to a neutral rating.
The performance of Brittain and Patel’s fund has demonstrated “a potential limitation in the application of the JPM quant process to the UK small-cap universe,” said Morningstar analyst Samuel Meakin.
While “the small-cap team clearly adds qualitative input over and above the quant screening in their assessment of small-cap stocks,” the analysts said they “have not seen conclusive evidence of success from this.”
“We therefore believe a neutral rating is a better reflection of our conviction in the strategy’s merits relative to other offerings in the category,” Meakin added.
The ratings agency also said the Schroder UK Dynamic Smaller Companies would be placed under review following the news that the fund’s managers Paul Marriage and John Warren would be departing in the fourth quarter.
