The RedZone

Good, independent fund research can really make a difference to an investor's finances, helping to maximise returns over the long term.

However, while choosing the right fund can significantly boost returns, picking the wrong fund can have a devastating effect on your investments too. That's where the Chelsea RedZone comes in.

Chelsea RedZone 

The RedZone is back once again to shine a light on funds that have failed to deliver over the past few years.

We hope you use it as a chance to scan your portfolio and see if it is being held back by a select few underperformers. It also gives you a chance to scrutinize the different
asset management houses and analyse whether they are delivering or falling short in providing strong performance across their product range.

In this year’s edition, the serial underperformer list consists of 75 funds, across 41 different companies and 15 different sectors. These companies collective underperforming assets total over £20.45 billion, larger than the size of Jamaica’s GDP.* For keen-eyed readers this is around £16 billion less than last year’s list which suggests that a few funds have got their acts together.

Abrdn retains its unenviable position as the firm with the most RedZoned funds (seven), accounting for 13% of underperforming assets. It is followed by Baillie Gifford—last year’s
joint leader - and Marlborough, each with five funds. Premier Miton has four, while Slater and Montanaro round out the list with three underperformers. It’s worth noting that although their poor periods shouldn’t be treated without concern, firms like Abrdn, Baillie Gifford and Premier Miton have fewer funds in the Redzone this year. Their inclusion, alongside others on the list, reflects a persistent challenge: many have a large weighting to small- and mid-cap stocks, which continue to trail their large-cap counterparts.

The most prominent sector is once again the UK All Companies, with 22 different funds. Many of the RedZoned funds that are in the UK All Companies sector focus their investment mainly in smaller companies. Due to their de-rating compared with their larger-cap peers, it’s perhaps an unfair comparison, with the UK Smaller Companies sector a better comparator for relative performance.

The Global sector has the second most underperformers with 12 funds, and Asia Pacific ex Japan, with seven funds. Sectors like Global hold a staggering 558 funds, so it’s not wholly unsurprising to see a few serial underperformers.

Baillie Gifford Global Discovery keeps its title as the worst performer in the Dropzone , underperforming the Global sector by a staggering 54.97% over three years. This year, only
one additional Baillie Gifford fund (Japanese Smaller Companies) joins the Dropzone, down from five in the previous year. The list underscores a recurring theme: funds with
smaller-company biases dominate, particularly in markets like the UK, with valuation gaps between large and small caps at historic highs. Perhaps more pain is to come, but if interest rates continue on the path of being cut and inflation doesn’t spike up, it could be the worst time to pivot away. This could be said of other RedZoned funds too; of course, some of them deserve another look, but it is always important to look at performance in context over the long term.

DropZone 

The Dropzone is the top 10 funds with the worst underperformance against their sector average over the course of three years. The worst performer in the Dropzone is Baillie Gifford Global Discovery, which underperformed the Global sector by a shocking 54.97% over the past three 3 years.

**https://worldpopulationreview.com/countries/by-gdp (2024)

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.