80-20 Investor Best of the Best Selection – October 2016 Update

Commentary

14 funds from last month's 29 Best of the Best Selection regained their position in October's shortlist. In one of the last updates before the US election the most striking aspect of the portfolio is that there is now no direct exposure to US equities at all. The risk/reward trade-off now favours European equities and those in emerging Asia. Last month the move towards Asia and Emerging markets looked particularly bold but turned out to be the right call as these sectors were the best performing for September with funds making between 2 and 3%.

Global bonds remain a signifiant component of the Selection although this has reduced slightly. This month's Best of the Best Selection once again adds a touch more equity exposure yet remains well diversified across asset classes, including a new cash weighting, which maintains the portfolio's overall risk level. We still see a number of managed funds from the Mixed sectors featured which reflects the diversified nature of the portfolio. In addition the low risk end of the portfolio has an increased exposure to absolute return funds, reducing the reliance on bond markets to perform well.

Although the portfolio has around 50% direct exposure to equities the 'alternatives' listed include exposure to equities but via derivatives etc. Unfortunately the opaque 'alternatives' label is a result of some fund managers' inability to fit their fund holdings into one of the Investment Association's official categories. So it's something DIY investors are stuck with.

In terms of performance the 80-20 Investor portfolio had a good month, finishing up 1.44%. during a month where we saw a market sell-off. By contrast professionally managed multi-asset funds finished September up between 0.5% and 0.9%. At the foot of this article you can see how the 80-20 Investor Portfolio has continued to outperform the professional fund managers as well as the market since its launch over 2 years ago.

Below I list this month's selection in full with the 14 funds that regained their place in black while the new additions are in green.

As usual, I have included the full list sorted alphabetically by name and then by risk category.

October's Best of the Best Selection - (A-Z by fund name)

(funds unchanged from last month are in black while new additions are in green)

 

Name	Sector	ISIN Code	Risk Level
Aberdeen - Japan Equity	Japan	GB0004521620	High risk
Architas MA - Active Moderate Income	Mixed Investment 0%-35% Shares	GB00B8HWD272	Low risk
AXA - Sterling Index Linked Bond	UK Index - Linked Gilts	GB00B02Y6C39	High risk
Baillie Gifford - Japanese	Japan	GB0006010838	High risk
Barclays - Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Low risk
BlackRock - Asia Special Situations	Asia Pacific Excluding Japan	GB00BJGZZ065	High risk
BlackRock - Emerging Markets	Global Emerging Markets	GB00B4R9F681	High risk
BlackRock - Overseas Corporate Bond Tracker	Global Bonds	GB00B58YKH53	Medium risk
CF Canlife - Global Bond	Global Bonds	GB00B4LW2X97	Medium risk
FP CRUX - European Special Situations	Europe Excluding UK	GB00BTJRQ064	Medium risk
Henderson - China Opportunities	China/Greater China	GB0031860934	High risk
HSBC - Corporate Bond	Sterling Corporate Bond	GB00B85KC152	Low risk
IFSL - Brooks Macdonald Defensive Capital	Targeted Absolute Return	GB00B61MR835	Low risk
Invesco Perpetual - Asian	Asia Pacific Excluding Japan	GB00B8N44Q86	High risk
JPM - Asia	Asia Pacific Excluding Japan	GB0030879695	High risk
Jupiter - Global Emerging Markets	Global Emerging Markets	GB00B4JVHP59	High risk
Legg Mason - IF ClearBridge Global Equity Income	Global Equity Income	GB00B2R8FL62	Medium risk
Man GLG - Corporate Bond	Global Bonds	GB00B0118B85	Medium risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
Newton - Real Return	Targeted Absolute Return	GB00B7VVXF60	Low risk
Old Mutual - Cirilium Conservative	Mixed Investment 0%-35% Shares	GB00B4LTHW43	Low risk
Royal London - Sustainable Diversified Trust	Mixed Investment 20%-60% Shares	GB00B844WJ68	Low risk
Royal London - Sustainable Managed Growth Trust	Mixed Investment 0%-35% Shares	GB00B8H7XS88	Low risk
Franklin - UK Equity Income	UK Equity Income	GB00B7DRD638	Medium risk
Standard Life Investments - European Ethical Equity	Europe Excluding UK	GB00B3N24788	Medium risk
Stewart Investors - Worldwide Sustainability	Global	GB00B845Y045	Medium risk
SVS Church House - Tenax Absolute Return Strategies	Targeted Absolute Return	GB00B28KSG75	Low risk
TB Saracen - Global Income & Growth	Global Equity Income	GB00B8MG4091	Medium risk
Threadneedle - Dynamic Real Return	Targeted Absolute Return	GB00BWWC6P48	Low risk
Wise Investments - TB Wise Investment	Flexible Investment	GB0034272533	Medium risk

October's Best of the Best Selection - (grouped by risk)

Here is October's shortlist grouped by their risk category (funds unchanged from last month are in black while new additions are in green):

Name	Sector	ISIN Code	Risk Level
Royal London - Sustainable Diversified Trust	Mixed Investment 20%-60% Shares	GB00B844WJ68	Low risk
HSBC - Corporate Bond	Sterling Corporate Bond	GB00B85KC152	Low risk
Old Mutual - Cirilium Conservative	Mixed Investment 0%-35% Shares	GB00B4LTHW43	Low risk
Royal London - Sustainable Managed Growth Trust	Mixed Investment 0%-35% Shares	GB00B8H7XS88	Low risk
Barclays - Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Low risk
Architas MA - Active Moderate Income	Mixed Investment 0%-35% Shares	GB00B8HWD272	Low risk
IFSL - Brooks Macdonald Defensive Capital	Targeted Absolute Return	GB00B61MR835	Low risk
Threadneedle - Dynamic Real Return	Targeted Absolute Return	GB00BWWC6P48	Low risk
SVS Church House - Tenax Absolute Return Strategies	Targeted Absolute Return	GB00B28KSG75	Low risk
Newton - Real Return	Targeted Absolute Return	GB00B7VVXF60	Low risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
Stewart Investors - Worldwide Sustainability	Global	GB00B845Y045	Medium risk
Wise Investments - TB Wise Investment	Flexible Investment	GB0034272533	Medium risk
TB Saracen - Global Income & Growth	Global Equity Income	GB00B8MG4091	Medium risk
Man GLG - Corporate Bond	Global Bonds	GB00B0118B85	Medium risk
Legg Mason - IF ClearBridge Global Equity Income	Global Equity Income	GB00B2R8FL62	Medium risk
Standard Life Investments - European Ethical Equity	Europe Excluding UK	GB00B3N24788	Medium risk
BlackRock - Overseas Corporate Bond Tracker	Global Bonds	GB00B58YKH53	Medium risk
CF Canlife - Global Bond	Global Bonds	GB00B4LW2X97	Medium risk
FP CRUX - European Special Situations	Europe Excluding UK	GB00BTJRQ064	Medium risk
Franklin - UK Equity Income	UK Equity Income	GB00B7DRD638	Medium risk
Jupiter - Global Emerging Markets	Global Emerging Markets	GB00B4JVHP59	High risk
Aberdeen - Japan Equity	Japan	GB0004521620	High risk
Henderson - China Opportunities	China/Greater China	GB0031860934	High risk
Baillie Gifford - Japanese	Japan	GB0006010838	High risk
Invesco Perpetual - Asian	Asia Pacific Excluding Japan	GB00B8N44Q86	High risk
JPM - Asia	Asia Pacific Excluding Japan	GB0030879695	High risk
AXA - Sterling Index Linked Bond	UK Index - Linked Gilts	GB00B02Y6C39	High risk
BlackRock - Emerging Markets	Global Emerging Markets	GB00B4R9F681	High risk
BlackRock - Asia Special Situations	Asia Pacific Excluding Japan	GB00BJGZZ065	High risk

 

The funds that dropped out of the Best of the Best Selection

For reference the funds from last month that dropped out of the 80-20 Investor Best of the Best list are listed below. Many of them remain in the Best funds by Sector selection:

 

Name	Sector	ISIN Code	Risk Level
Aberdeen - UK Equity Income	UK Equity Income	GB00B0XWN705	Medium risk
Artemis - Monthly Distribution	Mixed Investment 20%-60% Shares	GB00B6TK3R06	Medium risk
AXA - Sterling Strategic Bond	Sterling Strategic Bond	GB00B02Y6M37	Low risk
Baillie Gifford - European	Europe Excluding UK	GB0006057284	Medium risk
Fidelity - Global High Yield	Sterling High Yield	GB00B7K7SQ18	Low risk
Fidelity - Multi Asset Income	Mixed Investment 0%-35% Shares	GB00BGFBMY77	Low risk
Jupiter - Income Trust	UK Equity Income	GB0004791389	Medium risk
Man GLG - Japan Core Alpha	Japan	GB00B3F46Y30	High risk
Marks & Spencer - High Income	Sterling Strategic Bond	GB0030013345	Low risk
Premier - Global Utilities Income	Global Equity Income	GB0031637738	Medium risk
Schroder - Global Real Estate Securities Income	Property	GB00B50MLC91	High risk
Threadneedle - China Opportunities	China/Greater China	GB00B1PRW734	High risk
Threadneedle - Emerging Market Bond	Global Emerging Market Bond	GB00B817DW83	Medium risk
Threadneedle - European High Yield Bond	Global Bonds	GB00B6RRFW23	Medium risk
VT - De Lisle America	North America	GB00B3QF3G69	High risk

The Asset mix

The current asset mix of the new Best of the Best Selection is shown below with last month's figures in brackets:

• Global Fixed Interest 17% (22%)
• Alternatives/Other 20% (18%) - mostly absolute return strategies
• UK Corporate Fixed Interest (i.e UK bonds) 5% (7%)
• North American Equities 0% (5%)
• European Equities 13% (8%)
• Japanese Equities 7% (7%)
• Other international equities 6% (0%)
• Property 0% (4%)
• UK Equities 7% (12%)
• Cash 6% (0%)
• Asian equities 6% (5%)
• Asia Pacific Emerging equities 13% (12%)

80-20 Investor's outperformance continues

As you know the Best of the Best Selection is the shortlist of the best funds highlighted by our 80-20 Investor algorithm split into high, medium and low risk categories. This shortlist is updated at the start of every month.

The green line in the chart below (click to enlarge) shows how a portfolio would have performed since inception (in August 2014) if it had been split equally between the Best of the Best Selection funds and then switched each month when each new shortlist was published. I have also charted the performance against that of the FTSE 100 (the black line) and the average cautious managed fund (blue line) and the average managed fund with up to 85% equity exposure (red line). In reality the 80-20 Investor's asset allocation typically lies between these two as it usually has 60-85% exposure to equities at any one time. So they provide a good comparison of how fund managers with a similar remit have fared over the same period.

As you can see, since launch in August 2014 the 80-20 Investor portfolio has HUGELY outperformed the average managed fund and the market. The large spike in performance in the 80-20 Investor portfolio on the right hand side of the chart is where the portfolio rallied after the Brexit referendum while global markets plummeted.

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