The latest edition of Chelsea's annual RedZone list of underperforming funds has seen numbers fall sharply as a result of last year's market rotations.
The RedZone, which highlights funds that underperformed within their peer groups in each of the last three years, found that the number of culprits fell significantly once 2016 data was included.
The latest list is populated by just 184 funds, compared with 259 funds a year ago, marking a 40 per cent drop. Total assets in RedZone funds fell by just under 20 per cent to £93.7bn.
The DropZone, comprised of the 10 worst funds across all sectors, is now headed by HC FCM Salamanca Global Property, which has underperformed its sector by 69 per cent over the past three years. But assets in DropZone funds have also dwindled, suggesting investors are moving elsewhere, according to Chelsea.
Meanwhile equity portfolios with a global focus remained a concern, despite receiving a boost from sterling's slump last year.
The IA Global sector was again the worst culprit, with 24 funds from the sector included in the RedZone, though this was down from the 40 included last year.
“Given the universe of stocks available to global managers and the uplift created recently by the fall in sterling versus the US dollar, investors will be particularly disappointed that so many funds in the sector are continually underperforming,” said Chelsea research director Juliet Schooling Latter.
The second worst-performing group was IA Global Bond, with 15 portfolios. Notably, funds from this sector had three times the assets held by the underperforming Global equity funds at £30.5bn.
Elsewhere the IA UK All Companies sector contained 12 underperforming funds. This marked a significant fall, from 50 a year before, potentially due to the sudden outperformance of large caps last year.
The drop in RedZone funds was also beneficial to emerging-market focused asset manager Aberdeen.
Relative performance from several of the firm's strategies has improved, meaning it now has 15 funds in the Redzone compared with 26 a year earlier. However, it remains the firm with the largest number of underperforming funds.