The MI Downing UK Micro-Cap Growth fund has been suspended after it was deemed to be unviable as its assets slumped to £8.4m.
The fund's authorised corporate director (ACD) Maitland Institutional Services said it felt "the current investment climate, future redemptions and the on-going costs of operation do not support the viability of the fund at its current size and liquidity profile".
"It is our opinion that the continued operation of the fund is therefore no longer in the best interests of investors," it added.
Dealings in the fund were suspended on 4 November, with the ACD now considering "a range of options to ensure an outcome that is in the best interests of all investors".
In a note to shareholders, manager and Downing Fund Managers partner Judith MacKenzie said the decision "was not taken lightly", but said it was "the responsible thing to do while we consider a range of alternatives, and evaluate which option would be in the best interests of investors".
Both Maitland and Downing will waive their fees while the fund suspension remains in place. Downing will continue to actively manage the fund in line with its investment objective and policy, while Maitland will continue to calculate the fund's daily net asset value.
Maitland said it would seek regulatory approval to wind up the fund and liquidate its assets should no viable solution be found "within a reasonable timescale".
"Although we appreciate the inconvenience this may cause in the short term, we would like to assure investors that this approach is reasonable and considered and has been taken in the interests of all investors," the ACD told investors. "We will keep you appraised of developments in the coming weeks."
The fund had £35m in net assets on 11 January 2018, data from FE fundinfo show, but has seen that figure steadily decline in the intervening 34 months.
The fund's top five holdings include the likes of payments enabler Universe Group, food product distributor Real Good Food and recruiter Norman Broadbent, which have market capitalisations of £10.7m, £4.7m and £2.7m respectively.
In the five years to 17 November, the fund has lost 20% of its value, compared to a gain of 50.7% for its IA UK Smaller Companies sector average and 36.5% from its Numis Smaller Companies Plus AIM benchmark index.