We have downgraded Mainfirst Top European Ideas fund to a Morningstar Analyst Rating™ of Neutral. Although the long-term risk/return figures are still appealing, some concerns regarding the flexibility of the strategy and the firm make us reassess our view of the fund. 2014 was a difficult year for both the fund and its parent, Mainfirst; the fund’s acquisition of shares in MainFirst Holding AG was badly received by investors and resulted in both outflows and team instability. Although the company‘s actions did not run afoul of regulatory requirements and the stake was subsequently sold, the company’s choices were not an example of best practices. Also, the investment team and fund range turnover has been higher than what we would like to see and overall we think there is room for improvement. Historically, the portfolio manager has executed his approach flexibly and opportunistically, but we think that increased assets combined with his small-cap overweight currently limit his manoeuvrability, which was one of the main drivers of performance in the past. We believe a Neutral rating is appropriate at the current time.
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