Mobius (MMIT ) has sunk further into sub-scale territory after shareholders used the three-yearly redemption facility to cash in more than 40% of their shares.

The redemption of more than 49.7m shares – or 43% of share capital – will see the trust, which was launched by emerging markets star investor Mark Mobius in 2018, shrink from £167m to around £95m.

The slide takes it below £100m, which is widely considered as the threshold at which institutional investors and wealth managers will invest.

The size of the redemption appears at odds with the 7% discount the shares currently trade at, which puts it at narrower than global emerging market giants Templeton Emerging Markets (TEM ) and JPMorgan Emerging Markets (JMG ), at 9.3% and 8.4% respectively.

The redemption may, however, be a reaction to MMIT’s failure to take part in the blazing China recovery this year due to manager Carlos von Hardenberg’s underweight to the world’s second largest economy. As of the end of September, China made up just 4.6% of the fund’s holding.

Share price total returns severely lagged peers over the past year, up 6.1% versus a 38.2% average gain from peers in the Association of Investment Companies’ Global Emerging Markets sector. MMIT’s NAV has grown just 4.7% over the year, a fraction of the sector’s best performer Templeton – previously run by Mobius and Hardenberg − which boasts a 40.5% increase.

QuotedData head of investment company research James Carthew, said it was ‘not surprising’ that many shareholders ran for the exit given the poor performance.

While the fall below the £100m marker may ‘raise questions about its viability’, he said the trust can continue.

‘I don’t have a problem with small trusts, as long as they keep their overheads under control, but Mobius will need to demonstrate that it can turn its performance around,’ he said.

In a third quarter update, Hardenberg said the rally in China has ‘been driven primarily by sentiment and policy stimulus, rather than underlying fundamentals’, which is evidenced in weak economic data from the superpower.

‘The lack of a clear recovery in the real economy raises questions about the rally’s sustainability,’ he said.

The rebound in China has been mainly focused on the technology sector, pushing up valuations, and Hardenberg said he ‘continues to exercise caution’.

‘We have been carefully screening the Chinese market across select sectors to identify companies that meet our stringent quality and governance standards,’ he said.

‘While only a few appear potentially aligned with these criteria, we remain disciplined and will continue our search without compromising on quality.’