Hargreaves Lansdown has removed the River & Mercantile UK equity smaller companies product from its Wealth 150 list of recommended funds due to poor stock selection.
The IFA says it had high hopes for the fund when it launched in November 2006, but manager Dan Hanbury and deputy Richard Staveley have suffered after buying into the wrong equities of late.
Senior analyst Meera Patel says: “Given the calibre of the management duo we believed the River & Mercantile UK Equity Smaller Companies Fund had excellent prospects.
“Since launch the fund has outperformed the average fund in its sector, but returns have been solid rather than exceptional. More recently the managers’ stock selection has deteriorated, and this has been the main reason why the fund has struggled to significantly outperform its peers.”
River & Mercantile decided to hand the management of the fund to Richard Staveley at end-April, with Dan Hanbury moving to focus on other products.
Patel says: “Owing to its lacklustre recent performance and the change in management structure, we believe there are better alternatives for those wishing to invest new money in the sector.”
She adds: “We would stress this is not a recommendation to sell the fund – we would, however, like to see an improvement in performance, driven by positive stock selection, before recommending it for new investment.”
The fund ranks 42nd out of 60 funds in the IMA UK smaller companies sector over the past year, after delivering a 13.6 per cent gain compared to an average gain in the sector of 17.4 per cent, according to Morningstar.