80-20 Investor Best of the Best Selection – April 2018 Update

Commentary

If February 2018 was the month when volatility finally returned to equity markets then March 2018 was when it started to hurt investors. In February the sell-off was followed by a rebound but in March the market jitters over the escalating trade war rhetoric and technology stock sell-off showed little respite.

If you look at the latest heatmap once again cash was King. Interestingly bond fund returns recovered as Trump’s trade war gave rise to concerns over global economic growth which is good for bonds. The positive relationship between bonds and equities that we saw in February diminished meaning bonds have returned to the fold of the BOTB once again, proving a good diversifier to equities. It will be interesting to see whether that lasts. Yet the risks of owning bonds and gilts, and in particular index-linked gilts, have increased slightly, perhaps more so than some investors may anticipate. This explains why one of the gilt funds in this month’s BOTB is rated as medium risk. The presence of index-linked bonds is also perhaps a reflection of the increased inflationary concerns troubling both bond and equity markets.

The change in the investment backdrop in the last month has seen other funds move risk category. 80-20 Investor takes into account the current investment backdrop when looking at a fund’s risk level. For example, Premier Diversified, which has always been a low risk fund, is now a medium risk fund. When I next review my £50,000 portfolio I will review these changes with a view to maintaining the general medium risk level of my own portfolio.

Once again the BOTB contains commercial property rather than just shares of property companies in the low risk section. If we look at the medium and higher risk parts of the BOTB you will notice an increased presence of ‘income’ funds. This is not surprising as ‘income’ funds tend to invest in defensive sectors which while providing reliable dividends also tend to fare better in an equity market sell-off. In addition the BOTB has a sprinkling of smaller companies funds which is likely a reflection of investors favouring domestically focused stocks in the face of an escalating trade war (see my previous newsletter).

During the last two month’s the epicentre of the equity market correction has been US stocks and in particular technology stocks of late. This month the BOTB has a notable reduction in its US exposure but also in its technology exposure (down from around 20% to 10% in the underlying funds). So it's not a wholesale removal of either technology or US stocks but a case of risk management.

In April's BOTB there are 14 funds that have once again regained their position. Of those funds that are new many are familiar from past months' BOTB selections while many of the funds that lost their place in March's BOTB remain in their respective BFBS shortlists. It is notable that once again there is no exposure to European equities in this month's BOTB . European stocks have struggled with the German Dax only now starting to enjoy something of a rebound.

In terms of direct equity exposure the BOTB's exposure has dropped quite significantly from 67% last month to nearer 51% this month. The overriding theme of this month’s BOTB update seems to be reducing equity risk, especially in those areas most impacted by the ongoing correction, in favour of bonds and more defensive equity funds.

At the foot of this article you can see how the 80-20 Investor Selection has continued to outperform the professional fund managers as well as the market since its launch more than three 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.

 

April'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
Aberdeen Diversified Core Growth	Mixed Investment 20-60% Shares	GB00BVTW3820	Low risk
AXA Framlington American Growth	North America	GB00B5LXGG05	High risk
AXA Framlington Japan	Japan	GB00BRJZVR88	High risk
Baillie Gifford Global Discovery	Global	GB0006059330	Medium risk
Baillie Gifford Japanese Income Growth	Japan	GB00BYZJQG71	High risk
Baring Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	High risk
CFP SDL UK Buffettology	UK All Companies	GB00B3QQFJ66	High risk
FP Pictet Multi Asset Portfolio	Targeted Absolute Return	GB00BVYTTC41	Low risk
Janus Henderson China Opportunities	China/Greater China	GB0031860934	High risk
JPM Global Macro Balanced	Mixed Investment 0-35% Shares	GB00B09RGK38	Low risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	High risk
Jupiter UK Smaller Companies	UK Smaller Companies	GB0004911870	High risk
L&G UK Property	Property	GB00BK35DV33	Low risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	Medium risk
McInroy & Wood Smaller Companies	Global	GB00B8NC4D98	Medium risk
Natixis H2O MultiReturns	Targeted Absolute Return	GB00BFNXSH36	Medium risk
Old Mutual Corporate Bond	Sterling Corporate Bond	GB00B1XG7X39	Low risk
Premier Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Medium risk
Royal London Global Index Linked	Global Bonds	GB00B772RM82	Low risk
Sarasin Global Dividend (Sterling Hedged)	Global Equity Income	GB00BGDF8439	Medium risk
Schroder Global Equity Income	Global Equity Income	GB00B76V7M69	Medium risk
Schroder Income	UK Equity Income	GB00B3PM1190	Medium risk
Schroder Income Maximiser	UK Equity Income	GB00B5B0KM51	Medium risk
Schroder Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
Schroder Strategic Bond	Sterling Strategic Bond	GB00B7FPS593	Low risk
Standard Life Investments Global Emerging Markets Equity	Global Emerging Markets	GB00B7ZMKJ84	High risk
Standard Life Investments Global Index Linked Bond	Global Bonds	GB00B7C0H946	Low risk
Standard Life Investments UK Gilt	UK Gilts	GB00B6WZXS38	Medium risk
Threadneedle China Opportunities	China/Greater China	GB00B1PRW734	High risk
VT Tcam Absolute Return Portfolio	Targeted Absolute Return	GB00B4QPB031	Low risk

 

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

Here is April'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
Aberdeen Diversified Core Growth	Mixed Investment 20-60% Shares	GB00BVTW3820	Low risk
FP Pictet Multi Asset Portfolio	Targeted Absolute Return	GB00BVYTTC41	Low risk
JPM Global Macro Balanced	Mixed Investment 0-35% Shares	GB00B09RGK38	Low risk
L&G UK Property	Property	GB00BK35DV33	Low risk
Old Mutual Corporate Bond	Sterling Corporate Bond	GB00B1XG7X39	Low risk
Royal London Global Index Linked	Global Bonds	GB00B772RM82	Low risk
Schroder Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
Schroder Strategic Bond	Sterling Strategic Bond	GB00B7FPS593	Low risk
Standard Life Investments Global Index Linked Bond	Global Bonds	GB00B7C0H946	Low risk
VT Tcam Absolute Return Portfolio	Targeted Absolute Return	GB00B4QPB031	Low risk
Baillie Gifford Global Discovery	Global	GB0006059330	Medium risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	Medium risk
McInroy & Wood Smaller Companies	Global	GB00B8NC4D98	Medium risk
Natixis H2O MultiReturns	Targeted Absolute Return	GB00BFNXSH36	Medium risk
Premier Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Medium risk
Sarasin Global Dividend (Sterling Hedged)	Global Equity Income	GB00BGDF8439	Medium risk
Schroder Global Equity Income	Global Equity Income	GB00B76V7M69	Medium risk
Schroder Income	UK Equity Income	GB00B3PM1190	Medium risk
Schroder Income Maximiser	UK Equity Income	GB00B5B0KM51	Medium risk
Standard Life Investments UK Gilt	UK Gilts	GB00B6WZXS38	Medium risk
AXA Framlington American Growth	North America	GB00B5LXGG05	High risk
AXA Framlington Japan	Japan	GB00BRJZVR88	High risk
Baillie Gifford Japanese Income Growth	Japan	GB00BYZJQG71	High risk
Baring Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	High risk
CFP SDL UK Buffettology	UK All Companies	GB00B3QQFJ66	High risk
Janus Henderson China Opportunities	China/Greater China	GB0031860934	High risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	High risk
Jupiter UK Smaller Companies	UK Smaller Companies	GB0004911870	High risk
Standard Life Investments Global Emerging Markets Equity	Global Emerging Markets	GB00B7ZMKJ84	High risk
Threadneedle China Opportunities	China/Greater China	GB00B1PRW734	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
7IM US Equity Value	North America	GB00BWBSHX88	Medium risk
Artemis US Select	North America	GB00BMMV5105	Medium risk
AXA Framlington Global Technology	Technology & Telecommunication	GB00B4W52V57	High risk
FP Apollo Multi Asset Balanced	Mixed Investment 20-60% Shares	GB00B3FPF276	Low risk
FP Apollo Multi Asset Cautious	Mixed Investment 20-60% Shares	GB00B3FPDY55	Low risk
Franklin UK Smaller Companies	UK Smaller Companies	GB00B7FFF708	High risk
Janus Henderson Global Technology	Technology & Telecommunication	GB0007698847	High risk
JPM US	North America	GB0030878846	Medium risk
L&G High Income Trust	Sterling High Yield	GB00B0CNHJ41	Low risk
LF Livingbridge UK Micro Cap	UK Smaller Companies	GB00BV9FYS80	Medium risk
MI Chelverton UK Equity Growth	UK All Companies	GB00BP855B75	High risk
Neptune Emerging Markets	Global Emerging Markets	GB00B8J6SV12	High risk
Neptune Global Equity	Global	GB00B8DLY478	Medium risk
Sarasin Fund of Funds Global Equity	Flexible Investment	GB00B7YYSB32	Low risk
Standard Life Investments Japanese Equity Growth	Japan	GB00B76C7M93	High risk
Standard Life Investments UK Real Estate	Property	GB00BYPHP536	Low 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% (6%)
• Alternatives 15% (12%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 7% (0%)
• Emerging Market Fixed Interest 0% (0%)
• North American Equities 9% (24%)
• European Equities 0% (0%)
• Japanese Equities 11% (8%)
• Property 3% (8%)
• UK Equities 17% (20%)
• Cash 7% (7%)
• Asian equities 3% (3%)
• Asia Pacific Emerging equities 8% (7%)
• Other international equities 3% (5%)

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.

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