Chelsea RedZone 2026
The RedZone returns for our first Viewpoint of 2026. It endeavours to shine a light on funds that have underperformed expectations over the past few years. We hope you find it informative and that it provides an opportunity to scan your portfolio and identify what may be holding back some of your returns.
It also offers a chance to scrutinise different asset management houses and their ability to deliver strong performance for clients across their product ranges.
This year’s edition consists of 84 funds across 40 companies and 14 different sectors. Collectively, these companies’ underperforming assets total over £22 billion — larger than the size of Madagascar’s GDP. For close followers of the RedZone, this is roughly in line with last year’s edition.
Aberdeen (no longer Abrdn, after the firm decided to restore the vowels in its original name) once again retains the undesirable position of having the most RedZoned funds, with eight in total, accounting for 8% of underperforming assets. AXA returns to the RedZone ranked second with five funds, while M&G joins the list in joint-third place alongside Baillie Gifford and Marlborough with four. However, it should be noted that obviously some larger providers have more funds than smaller boutiques.
It is worth noting that, although these periods of underperformance should not be dismissed lightly, many of these firms are very large and also manage funds that rank at the top of their respective sectors. Underperformance may be driven by factors such as a fund being in redemption, making it harder to manage, or a manager’s investment style falling out of favour. The latter often has a tendency to whipsaw back after a period of substandard returns, highlighting the importance of maintaining a balance of styles within a portfolio.
UK All Companies once again has the highest number of underperforming funds, at 23, followed by Global, like last year, which has 20 funds, although of course these sectors are larger. The North American sector trails in third place with 12 underperforming funds. Funds with lower exposure to technology have struggled in this sector as the Magnificent Seven’s strong performance has continued.
This year, Marlborough Global Innovation has been awarded the unwanted title of ‘King of the DropZone ’, having underperformed the global sector by 56.55% over the past three years. The majority of funds that have underperformed their sectors by the widest margins have sustainability mandates embedded within their investment processes. This highlights how investment style can move in and out of favour over time. Many sustainability-focused companies have de-rated over recent years, and, as a result, funds with this focus have struggled.
It is also worth highlighting that two years ago Baillie Gifford had six funds featured in the DropZone; this year, it has none, with many of those previously listed funds showing improved performance. As always, it is essential to consider performance in context, over the long term.
*RedZone entry requirement – three years of consecutive 3rd of 4th quartile performance. At least 10% underperformance versus the sector average. No new manager in the past 18 months.
Past performance is not a reliable indicator of future returns. Please note that the RedZone and DropZone do not constitute investment advice. If you are in any doubt as to the suitability of any investment you should seek professional advice. An appearance of any fund in these lists is not an indication they should be sold or switched.
Please note, we only feature RedZone once a year, in our Spring Viewpoint.
