Investors withdrew £374m from the Lindsell Train UK Equity fund in September, and John Monaghan, a senior analyst at Square Mile Research, said issues might arise if this trend continued.
Mr Train's funds are known for having large stakes in FTSE 100 companies such as Unilever, Diageo and Relx, in which huge volumes of shares are bought and sold daily.
This means the manager should be able to sell shares quickly if necessary. But according to Mr Monaghan, Mr Train is reluctant to do this, as any major sell-off would increase the fund's relative exposure to its less liquid stocks.
Instead he would be inclined to raise cash by selling shares in all fund holdings on a proportional basis, the analyst said. That would mean attempting to sell down less liquid holdings, some of which count Mr Train as the largest shareholder, as well as larger stocks.
Concerns like these mean Square Mile has downgrading its rating of the fund from AAA to A, the lowest rating at which a fund can still be regarded as a buy.
"Given the current liquidity levels within the underlying stocks held, we believe there could be significant issues should the fund experience a prolonged period of and/or a sizeable level of redemptions," the ratings agency said.
Mr Train suggested recent outflows could be connected to a wider "nervousness" about the UK equity market rather than specific concerns about his fund.
Less liquid holdings in Mr Train's fund include Celtic Football Club, Manchester United Football Club and pub company Young & Co's Brewery. Young's has a market cap of over £700m but is listed on the Alternative Investment Market, where trading volumes are thinner.
Lindsell Train is the largest institutional holder of Celtic and Young's stock, and the second largest institutional holder of Manchester United's stock, according to S&P Capital IQ data.
Square Mile's Mr Monaghan said he remains confident in the fund manager’s ability over the long term, but that the present shift away from growth stocks and into value stocks in the market was likely to mean a period of underperformance, and a potential liquidity issue in the short and medium term.
The Lindsell Train UK Equity fund has lost 3 per cent in the past three months to November 26, according to data from FE Analytics, compared with a gain of 5 per cent for the average fund in the IA UK All Companies sector in the same time period.
Over the past five years the fund has returned 78 per cent, compared with 36 per cent for the sector average.
In his most recent update to investors, Mr Train said: "As confidence increases that the UK will avoid a no-deal Brexit the so-called 'defensive' companies that make up a significant part of your portfolio become less highly valued by investors and their share prices have fallen."
Commenting on the recent outflows Mr Train said: "Our UK Equity fund has not been immune to the trend of widespread outflows from UK equity funds this year.
"It is difficult therefore to gauge whether flows are related to anything other than nervousness about the UK equity market in general.
"We are aware however that some investors have taken advantage of strong historic performance to re-balance their portfolios and that some are making a call away from 'quality growth'.
"However, to put things into perspective, fund flows for the year to end October have been marginally positive."
david.thorpe@ft.com
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