Woodford Equity Income's investment process has become "structurally impaired" following its suspension, according to Morningstar's Peter Brunt.
The influential ratings agency has downgraded the fund to ‘negative' as a result, less than a month after it moved to a ‘neutral' stance on the fund.
Peter Brunt, associate director for equity strategies within the manager research department at Morningstar, said: "By suspending dealing in shares in the fund, Woodford Investment Management has the time to significantly increase the liquidity profile of the portfolio without triggering a fire sale of illiquid assets."
However, he added: "With portfolio positioning now focused more on sourcing liquidity than on investment conviction, we consider the strategy structurally impaired in its ability to implement its investment process."
Brunt had previously said that "persistent redemptions, underperformance, and stock-specific issues, combined with the manager's relentless willingness to push the portfolio to its liquidity limit, have resulted in portfolio positioning that we consider extreme", when downgrading the fund to ‘neutral' just last month.
It is yet another blow to Woodford, which saw its mandates to run a suite of UK equity funds for wealth manager St James's Place terminated on Wednesday afternoon.
Woodford's flagship portfolio has also been stripped of its place in investment platform Hargreaves Lansdown's Wealth 50 list. The firm also waived its platform fee for the fund. Meanwhile his closed-end fund Woodford Patient Capital has been downgraded by both Winterflood Securities and Stifel.