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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