The move follows similar action against the fund in June 2019 amid concern about its less liquid bond holdings, which triggered large outflows of client cash and a share price slide for its majority owner, banking group Natixis.

The fund posted losses of 17.9% on March 9 and 25.4% on March 12 as coronavirus fears and a sliding oil price hit markets, pushing the fund's volatility up to 40% on an annualised basis, Morningstar said in a note on Tuesday.

"In the past, the fund has routinely exceeded its 7% to 12% average ex-post volatility target (referenced in the fund?s prospectus), but the extent of the recent derailment is alarming," Morningstar said.

In response, a spokesman for H2O said the firm had a "robust" risk management framework in place and had "reduced significantly its exposures across its portfolios".

"Risks must be assessed with regards to the investment horizon of each fund which, in the case of H2O Allegro, is three years," he said.

After falling more than 65% over the last two weeks amid a broad sell-off of European banks by investors spooked by the prospect of global recession, shares in Natixis were up 6.5% on Tuesday, outperforming the French blue-chip bourse.

By Simon Jessop