Morningstar has downgraded the Merian UK Equity fund following the appointment of seasoned UK equity investor Richard Buxton to the helm, stating it is waiting for a track record before endorsing the fund.
Buxton took over the fund from Simon Murphy on 1 January 2019, a week before the asset manager announced he would be stepping back as chief executive.
The £133.2m fund has dropped to a Morningstar rating of neutral from bronze.
"Buxton is looking to bring his process from the Merian UK Alpha fund to this fund. He adopts a long-term, contrarian approach that seeks to avoid short-term trading in favour of investing in companies that appear underpriced relative to their long-term growth prospects. This includes investments in industries or companies undergoing structural change or a turnaround, as well as longer-term growth stories. He mixes top-down and bottom-up analysis in order to select a concentrated, high-conviction portfolio," Morningstar said.
"Nevertheless, Buxton is prepared to adjust the portfolio where he thinks he is able to benefit from shorter-term market conditions. His approach has typically led to outperformance in rising markets but has lagged in falling markets, and the recent period of relative weakness in 2015-16 serves to emphasise that the approach is only suitable for investors willing to tolerate variable returns in the shorter term."