Morningstar downgrades Nimmo’s SLI smaller companies fund

Morningstar has downgraded the £1.16bn Standard Life UK Smaller Companies fund from gold to silver, amid concerns about fees and performance.

In an anslyst note, Daniel Vaughan, senior manager research analyst at Morningstar, says that while the research house still has confidence in manager Harry Nimmo, it has some concerns.

Vaughan says positives on the fund exist, “such as Nimmo’s longevity and good long-term record, together with a quality growth approach that has been consistently applied.”

However, he says Morningstar has “less conviction given the combination of a change in the portfolio’s market cap composition, the high fee hurdle and the recent performance issues”.

The fund has underperformed over three and five years, delivering 60.84 per cent returns over three years to the end of June, compared to 69.85 per cent for the UK smaller companies average. Over five years the fund has returned 103.92 per cent compared to 111.32 per cent for the sector.

However, the fund has returned 270.86 per cent over 10 years, compared to 151.23 per cent for the sector.

The fund also appeared on Tilney Bestinvest’s Spot the Dog list of underperforming funds last year, after underperforming its benchmark by at least 10 per cent for three years.