How did a dozen funds tipped to bounce back fare?

When an asset class or investment style falls out of favour, investors face a familiar dilemma: wait for a recovery or move on and risk missing the rebound.

At the end of 2024, we asked fund analysts and wealth managers to name funds they continued to hold or recommend despite recent underperformance. What followed in 2025 was far from uniform, with a spread of returns from gains of 70% to a loss of 20%.

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Below, we revisit each fund and suggest three new out-of-form picks for 2026. (All data sourced from FE Analytics).

Gresham House Energy Storage

Peel Hunt analyst Markuz Jaffe had the standout call, with Gresham House Energy Storage Ord (LSE:GRID) delivering a 69.2% share price gain in 2025, recouping losses from the previous 18 months and significantly beating its renewable energy infrastructure trust peer group, which rose just 0.6%.

Jaffe says it was “one of the strongest share price total returns of 2025 across all London-listed investment companies we monitor”. The rally was driven by progress on the company’s three-year plan and the mid-year take-private of rival Harmony Energy Income Trust. He remains positive for 2026, citing rising portfolio capacity and 30%-plus discount to net asset value (NAV).

International Biotechnology

MIGO Opportunities tipped International Biotechnology Ord (LSE:IBT) for a turnaround in 2025, having owned it for the previous three years. Shares rose 45.2% over the year, well ahead of the peer group, which gained 22.2%.

MIGO sold the trust in March, with co-manager Charlotte Cuthbertson citing “rising US political risk muddying the outlook”, missing an April dip and the subsequent rebound.

Proceeds were recycled into other ideas, including the strongest performer among our 12 funds, Gresham House Energy Storage. The team is “particularly excited” about its prospects for 2026, adding that if the market does not rerate it, a private takeout could provide a catalyst.

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Baillie Gifford European Growth

Baillie Gifford European Growth Ord (LSE:BGEU) rose 27.6% in 2025, slightly ahead of its peer group, while NAV growth was more modest at around 16%. Kepler Partners’ Thomas McMahon says a large holding in Novo Nordisk AS ADR (NYSE:NVO) and lack of exposure to banks partly offset strong gains from technology holdings, including Spotify Technology SA (NYSE:SPOT) and Bending Spoons.

He reckons 2026 could be a “huge winner” for Bending Spoons amid a rumoured bumper IPO, and adds: “With more rate cuts on the horizon and some signs of animal spirits returning in the unlisted equity space, 2026 is shaping up to be a better year for the NAV.”

Chrysalis Investments

Chrysalis Investments Limited Ord (LSE:CHRY) rose 12.7% in 2025, lagging its growth capital peer group, which gained 29.2%. James Carthew, head of investment companies at QuotedData, rates the performance as “not too bad but perhaps less exciting than I’d hoped”.

Although the long-awaited Klarna Group (NYSE:KLAR) IPO went ahead, Chrysalis chose to hang on to the stock and the share price has since fallen.

“The discount has narrowed a bit, helped by a significant share buyback programme, but there’s the potential for it to improve further,” adds Carthew.

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Comgest Growth Japan

Comgest Growth Japan GBP U Acc rose 12.6% in 2025, underperforming its peer group, which gained 16.9%. FundCalibre managing director Darius McDermott calls the “solid positive return” notable, given the fund’s still out-of-favour quality growth style.

“Japanese equity markets have been driven primarily by cyclical, value and export-oriented stocks, benefiting from yen weakness, rising inflation expectations and renewed interest in balance sheet reform,” he says.

McDermott is confident the fund will “experience a revival as the cycle evolves” – a trend he expects to extend to other Comgest quality-growth strategies, including Comgest Growth Europe ex UK GBP SU Acc and Comgest Growth America GBP U Acc.

Caledonia Investments

Caledonia Investments Ord (LSE:CLDN) rose 12.5% in 2025, in line with a 12% gain for the Flexible Investment trust peer group.

Peel Hunt’s Anthony Leatham highlights the sale of its minority stake in multi-family office Stonehage Fleming at a 30% uplift to carrying value, due to complete in the first half of 2026, as evidence of an unjust double-digit discount.

“When we look at CLDN, its track record, the calibre of the team and uplifts on realisations, we continue to see a disconnect between the share price and the NAV,” he says.

Leatham would “reload” on the trust for 2026 while “mixing things up” with a private equity pick (see below).

Klarna IPO: a banner for the buy now, pay later firm at the New York Stock Exchange in September 2025. Photo: Spencer Platt/Getty Images.

Slater Growth

Slater Growth P Acc rose 11.1% in 2025, lagging its UK All Companies peer group, which gained 15.1%, and the FTSE All-Share index, up 22.9%.

The UK multi-cap fund is concentrated in just 40 stocks and has a bias towards smaller and mid-sized companies. Kamal Warraich, head of fund selection at Canaccord Wealth, is encouraged by “signs of life” in this part of the market.

“The broadening out of markets over the past 12 months has supported the strategy, and we believe this momentum will continue in the coming months,” he says.

Artemis UK Smaller Companies

The FTSE 250 index rose 12.9% during the year – less than half the 25.8% gain for the FTSE 100. Against this backdrop, Artemis UK Smaller Companies I Acc eked out a 5.1% return, one percentage point higher than the UK smaller companies peer group.

“Despite M&A activity, small cap just didn’t find a buyer,” says Fairview Investing director Ben Yearsley. “The positives? The fund beat cash and inflation – just.”

He is pencilling in two to three UK interest rate cuts for 2026, which “should help the consumer and therefore UK small cap”, and reckons the Artemis fund is “an ideal choice”.

He also rates the prospects for Greencoat UK Wind (LSE:UKW) – the laggard of our 12.

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Stonehage Fleming Global Best Ideas

Stonehage Fleming Global Best Ideas Eq D GBP Inc rose just 1.7% in 2025, lagging its global peer group, up 10.4%, and the MSCI ACWI index, up 12.7%. Alex Watts, senior investment analyst at interactive investor, notes that while markets rotated away from US growth, 2025 remained a tough year for quality investors.

“Returns were dominated by banks, defence companies and miners – not typical havens for quality investing,” he says.

Manager Gerrit Smit continues to focus on quality growth companies across healthcare, AI and critical infrastructure. Watts adds: “A reversion to outperforming may hinge on the market rewarding these structural themes and the team’s ability to select the best businesses.”

Fundsmith Equity

Fundsmith Equity I Acc treaded water in 2025, posting a 0.2% gain as Terry Smith’s concentrated quality approach remained out of favour. Watts notes that Danish drug manufacturer Novo Nordisk and Coloplast AS Class B (XETRA:CBHD) were the largest detractors, while strong returns from veterinary diagnostics business IDEXX Laboratories Inc (NASDAQ:IDXX) partly offset the drag.

“Selection across Smith’s substantial healthcare allocation weighed on performance, reflecting the fund’s refusal to mirror capitalisation-weighted indices,” says Watts.

The fund’s portfolio companies remain financially robust, with strong cash flows and margins. Outperformance could return if markets refocus on fundamentals, benefiting disciplined investors such as Smith, adds Watts.

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BH Macro

BH Macro GBP Ord (LSE:BHMG) made a small loss of 2.4% in 2025, compared with a 2% gain for its hedge fund peer group.

Chris Clothier, co-CIO of CG Asset Management – manager of Capital Gearing Ord (LSE:CGT), which took a position in BH Macro last March – says: “Unfortunately, it had a torrid year. In addition to its long volatility position, the fund takes macro bets. In 2025, many of those bets turned out to be wrong.”

CGT is sticking with the trust for protection against unleashed market volatility. “Unchecked, risk piles up just as snowfall piles up on a ridge,” says Clothier. “We cannot know what will trigger the eventual avalanche, but when it hits, BH Macro will provide safe refuge.”

Greencoat UK Wind

Shares in Greencoat UK Wind (LSE:UKW) fell 17.5% in 2025, while the renewable energy peer group was essentially flat. EQ Investors’ investment manager Andrew Rees attributes the “disappointing result” to lower-than-expected revenues due to weaker wind speeds and zonal pricing.

EQ continues to invest but Rees adds: “We are engaging actively with management teams and boards in the sector to assess the potential for corporate activity.”

Yearsley rates the outlook for the sector, UKW in particular. “High yields and covered dividends make the space interesting,” he says. “Negativity is so pronounced it feels like the bottom.”

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Three turnaround ideas for 2026

Bluefield Solar Income

Carthew spots Bluefield Solar Income Fund (LSE:BSIF) as a 2026 turnaround pick, following a 19.6% drop in 2025. Despite a double-digit dividend yield, a falling NAV and widening discount have left investors in the red over five years.

“There are reasons for the underperformance – weaker power price forecasts, government attempts to backdate subsidy calculations and delays on cost disclosure reforms forcing selling,” says Carthew. “The good news is the board has reached the end of its tether and put the company up for sale. “I expect the bid price to be a long way north of the current 69p, a 40% discount to NAV.”

On the date of publication, 10 February, its share price had risen to 75p and its discount had declined to 33.5%.

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HabourVest Global Private Equity

Shares in HarbourVest Global Priv Equity Ord (LSE:HVPE) rose 17.4% in 2025 – and Peel Hunt reckons they have further to run.

“We note a return to more normalised portfolio growth and improving private market conditions heading into 2026, alongside the prospect for further realisations,” says Leatham.

He highlights its fund-of-funds approach, global network of private equity professionals and portfolio offering exposure to 19 of the world’s 20 largest unicorns, which he reckons will help the discount to narrow from a current 28%.

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RIT Capital Partners

Kepler Partners’ Thomas McMahon names RIT Capital Partners Ord (LSE:RCP) as a new pick for 2026, after “good but not stellar” performance in 2025, gaining 17.2%.

He likes its thematic exposures, such as European strategic autonomy, China and AI. “It also has a strong set of investments in unlisted equity including OpenAI and crypto exchange Kraken. Many of these are via managers closed to new money,” says McMahon.

“Growth capital is set to do well, with big IPOs planned and lower interest rates fuelling interest in growth businesses,” he adds. “RIT is on a wide discount of 23% and looks set to come back into favour in a big way.”