Square Mile has removed the AA ratings of the Liontrust Strategic Bond fund, the TM CRUX European fund and the R&M UK Equity Income fund due to a combination of poor performance and departing managers in the firm's latest ratings round-up.
Following news of the retirement of Liontrust's David Roberts (pictured), co-manager of the strategic bond fund, Square Mile analysts expect there to be a "significant hit" to the fund's small team given the "extensive skill-sets" required to manage it. They therefore decided to remove the AA rating.
Similarly, founding member of River & Mercantile Dan Hanbury is also moving on to different pastures prompting Square Mile analysts to carry out a re-evaluation, also deciding to remove the AA rating.
They said the long-standing fund manager's involvement was a "crucial" aspect of the fund's rating, meaning his departure no longer warranted the UK equity income fund to remain in Square Mile's Academy of Funds.
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For the TM CRUX European fund, the analysts reviewed the "highly competitive" European equity space.
Square Mile stated: "Over recent years, [the fund] has struggled to meet its performance aspirations, contributing to a fall in its assets."
The analysts also decided to lower the rating of the TM CRUX European Special Situations fund from AA to A, highlighting how it has "faced many challenges".
"Although some of the reasons for its underperformance are explainable, there have been periods when returns have not been as consistent as the analysts would expect given the managers' stock picking skills," they said.
The Artemis UK Special Situations fund was also downgraded from AA to A, with Square Mile stating that an A rating "better reflects" the current conviction level of the fund.
Three new ratings were also awarded in February's Academy of Funds roundup.
The Waverton Sterling Bond fund was awarded an A Rating, the Aegon Strategic Bond fund got a Positive Prospect rating, and the LF Morant Wright Nippon Yield fund received an AA Rating.
The analysts believe Waverton's fund offers "a rare opportunity" within the IA Strategic Bond sector, providing diversification from wider markets without sacrificing returns, while Aegon's strategic bond fund demonstrates an active, high conviction approach which has delivered "impressive" returns since launch in 2018.
They predict that the LF Morant Wright Nippon Yield fund will also reward investors with capital growth over the long-term.
To carry out the ratings process, Square Mile analysts conducted 47 interviews with investment professionals from 30 asset management groups throughout February, taking the above actions based on intelligence gained at these meetings and following reviews in light of corporate announcements.
