(Dow Jones) Waddell & Reed Financial Inc., recently in the spotlight for a possible role in the May 6 "flash crash," now is getting more unwanted attention.

Recent lagging performance by its $20.3 billion Ivy Asset Strategy Fund (WASAX), among other factors, is causing some analysts to question the firms' ability to draw new money.

In the past two days, two companies have downgraded Waddell & Reed, based in Overland Park, Kan., because of fund performance issues. The perceived problems are heightened by the Asset Strategy Fund's importance to the company: it accounts for a good chunk of the company's $74 billion in assets under management.

Citigroup Global Markets analysts downgraded Waddell's stock to hold from buy and lowered their 12-month price target on the shares to $32 from $42 Thursday, citing "fund concentration," and "eroding fundamentals" around the Asset Strategy Fund, among other factors.

FBR Capital Markets analyst Matt Snowling on Wednesday downgraded Waddell's stock to market perform from outperform and cut his price target to $32 from $42. He cited Asset Strategy's continued underperformance and said "the risk and rising possibility of client outflows" were enough to put FBR on the sidelines.

The Asset Strategy Fund is down 8.4% this year through May 26, lagging its peers in the world allocation category, which have slipped 4.5% on average, according to Morningstar Inc. In the 12 months through May 26, it gained 6.8% while its peers are up nearly 12% on average, Morningstar said.

The fund's longer-term track record is strong, and it carries five stars, Morningstar's highest rating. Over five years through May 26, the Asset Strategy Fund has gained 11.8%, while its peers have gained just 3.6% on average, Morningstar said.

It's a good option for aggressive investors, but it's not for everybody, said Kevin McDevitt, a fund analyst at Morningstar. The fund can make dramatic allocation swings-its turnover is more than 200%-and may have as much as 40% of its assets in emerging-markets investments at times, he said.

In addition, the fund aggressively hedges its stock holdings using futures contracts. "They're so active in terms of putting hedges on and off, and making really big bets, it's possible this fund can get whipsawed from time to time," he said.

In commentary this week, the fund's managers said that its recent underperformance was driven by their active bet on Asia. "The volatility may be unsettling, but we see it as opportunity to exploit the controversy in the Chinese market and capitalize on valuation," he said. They've long advised investors to have a long-term perspective, they noted.

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