Commentary
Usually, as the BOTB adapts to unfolding market trends somewhere between a half and two-thirds of funds remain the same from month to month. It's unusual to see wholesale changes in the BOTB from one month to the next. But if you go back through these monthly summaries you will see that it does occur but only when there is a complete shift in market sentiment. That is what we've experienced since mid-February when the reflation trade gripped markets.
As I explained in April's monthly newsletter, during March "Asian equities and the Nasdaq 100 were dragged down by technology stocks and US-China political tensions the S&P 500, Dow Jones and the German Dax all powered to new all-time highs after a weak start to the month". Meanwhile, value stocks outperformed growth stocks around the world.
Momentum trades that had been outstanding performers over the last 12 months started lagging over the last 6 weeks, while 2020's losers became the new winners. The chart below shows the performance of March's BOTB versus a benchmark constructed by assuming the same asset mix as the BOTB but using the average return achieved by funds within each sector the BOTB is exposed to. That chart also includes February's BOTB for comparison purposes. It shows how the BOTB's growth focus hampered returns over the month, although it was not disastrous as the selection still finished in positive territory. But the outperformance of March's BOTB versus February's BOTB shows how the asset mix had moved away from funds with a growth/technology focus towards value stocks and how that in turn boosted March's BOTB's average return.
Unsurprisingly the move away from growth funds in favour of value/cyclical equity funds continues. Given the acceleration of the reflation trade, only 8 funds from March's BOTB remain in April's BOTB which is one of the lowest numbers for some time. Interestingly the overall asset mix of April's BOTB is not too dissimilar from March's, but it's the funds that have changed with a number of the reflation trade winners that I identified in my recent research piece now making the cut.
The most notable trends this month are an increased exposure to UK equities (now the largest component of the BOTB), especially to smaller companies stocks. Also a reduced exposure to bonds (the lowest for some time) in favour of absolute return funds and multi-asset funds. There is still no place for gilt funds after their dismal performance in recent months. European equities make a return while direct exposure to Chinese equities has now been removed. The overall equity exposure of the BOTB sits around 63%, which is broadly the same as the previous month.
At the foot of this article, you can see how the 80-20 Investor selection continues to outperform the professional fund managers as well as the market since its launch six and a half years ago.
Below I list this month's selection in full with the 8 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 |
| Allianz UK Opportunities | UK All Companies | GB00B8BB9445 | High risk |
| Artemis Global Income | Global Equity Income | GB00B5N99561 | Medium risk |
| Artemis SmartGARP Global Emerging Markets Equity | Global Emerging Markets | GB00BW9HL132 | Medium risk |
| Artemis SmartGARP Global Equity | Global | GB00B2PLJP95 | Medium risk |
| AXA Framlington Managed Income | Sterling Strategic Bond | GB00B7H1PG56 | Low risk |
| Barings Global Agriculture | Specialist | GB00B3B9V927 | High risk |
| BM Brooks Macdonald Defensive Capital | Targeted Absolute Return | GB00B61MR835 | Low risk |
| Courtiers Total Return Cautious Risk | Mixed Investment 20-60% Shares | GB00B1P2K418 | Low risk |
| ES R&M UK Recovery | UK All Companies | GB00B614J053 | Medium risk |
| Fidelity American Special Situations | North America | GB00B89ST706 | High risk |
| Fidelity UK Smaller Companies | UK Smaller Companies | GB00B7VNMB18 | High risk |
| FP Octopus UK Micro Cap Growth | UK Smaller Companies | GB00BYQ7HN43 | High risk |
| FP Pictet Multi Asset Portfolio | Targeted Absolute Return | GB00BVYTTC41 | Low risk |
| Invesco Asian (UK) | Asia Pacific Excluding Japan | GB00B1W7HW60 | Medium risk |
| Invesco Global Emerging Markets (UK) | Global Emerging Markets | GB00B3RW7S64 | Medium risk |
| Invesco Global Smaller Companies (UK) | Global | GB00B3RS8K36 | High risk |
| Invesco High Yield (UK) | Sterling High Yield | GB00B3RW7649 | Low risk |
| Jupiter Income Trust | UK Equity Income | GB0004791389 | Medium risk |
| Marlborough European Multi-Cap | Europe Excluding UK | GB0001719730 | High risk |
| Premier Miton UK Value Opportunities | UK All Companies | GB00B8KV0M06 | High risk |
| Premier Miton Worldwide Opportunities | Flexible Investment | GB0031831133 | Medium risk |
| Schroder Global Equity Income | Global Equity Income | GB00B76V7M69 | Medium risk |
| Schroder High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Schroder MM Diversity | Mixed Investment 20-60% Shares | GB00B60CZD52 | Low risk |
| Schroder Monthly Income | Mixed Investment 20-60% Shares | GB00B78ST188 | Low risk |
| Schroder Strategic Bond | Sterling Strategic Bond | GB00B7FPS593 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Schroder UK Smaller Companies | UK Smaller Companies | GB00B76V7Z98 | High risk |
| Schroder US Mid Cap | North America | GB00B7LDLV43 | High risk |
| Wise Funds Limited TB Wise Multi-Asset Growth | Flexible Investment | GB0034272533 | Medium 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 |
| AXA Framlington Managed Income | Sterling Strategic Bond | GB00B7H1PG56 | Low risk |
| BM Brooks Macdonald Defensive Capital | Targeted Absolute Return | GB00B61MR835 | Low risk |
| Courtiers Total Return Cautious Risk | Mixed Investment 20-60% Shares | GB00B1P2K418 | Low risk |
| FP Pictet Multi Asset Portfolio | Targeted Absolute Return | GB00BVYTTC41 | Low risk |
| Invesco High Yield (UK) | Sterling High Yield | GB00B3RW7649 | Low risk |
| Schroder High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Schroder MM Diversity | Mixed Investment 20-60% Shares | GB00B60CZD52 | Low risk |
| Schroder Monthly Income | Mixed Investment 20-60% Shares | GB00B78ST188 | Low risk |
| Schroder Strategic Bond | Sterling Strategic Bond | GB00B7FPS593 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Artemis Global Income | Global Equity Income | GB00B5N99561 | Medium risk |
| Artemis SmartGARP Global Emerging Markets Equity | Global Emerging Markets | GB00BW9HL132 | Medium risk |
| Artemis SmartGARP Global Equity | Global | GB00B2PLJP95 | Medium risk |
| ES R&M UK Recovery | UK All Companies | GB00B614J053 | Medium risk |
| Invesco Asian (UK) | Asia Pacific Excluding Japan | GB00B1W7HW60 | Medium risk |
| Invesco Global Emerging Markets (UK) | Global Emerging Markets | GB00B3RW7S64 | Medium risk |
| Jupiter Income Trust | UK Equity Income | GB0004791389 | Medium risk |
| Premier Miton Worldwide Opportunities | Flexible Investment | GB0031831133 | Medium risk |
| Schroder Global Equity Income | Global Equity Income | GB00B76V7M69 | Medium risk |
| Wise Funds Limited TB Wise Multi-Asset Growth | Flexible Investment | GB0034272533 | Medium risk |
| Allianz UK Opportunities | UK All Companies | GB00B8BB9445 | High risk |
| Barings Global Agriculture | Specialist | GB00B3B9V927 | High risk |
| Fidelity American Special Situations | North America | GB00B89ST706 | High risk |
| Fidelity UK Smaller Companies | UK Smaller Companies | GB00B7VNMB18 | High risk |
| FP Octopus UK Micro Cap Growth | UK Smaller Companies | GB00BYQ7HN43 | High risk |
| Invesco Global Smaller Companies (UK) | Global | GB00B3RS8K36 | High risk |
| Marlborough European Multi-Cap | Europe Excluding UK | GB0001719730 | High risk |
| Premier Miton UK Value Opportunities | UK All Companies | GB00B8KV0M06 | High risk |
| Schroder UK Smaller Companies | UK Smaller Companies | GB00B76V7Z98 | High risk |
| Schroder US Mid Cap | North America | GB00B7LDLV43 | 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:
| Name | Sector | ISIN Code | Risk |
| Allianz Total Return Asian Equity | Asia Pacific Excluding Japan | GB00B1FRQV53 | Medium risk |
| ASI Strategic Bond | Sterling Strategic Bond | GB00BWK27X12 | Low risk |
| Baillie Gifford Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Barclays Multi-Asset Cautious | Mixed Investment 0-35% Shares | GB00BD93Z723 | Low risk |
| Close Select Fixed Income | Sterling Strategic Bond | GB00BD6R7Y87 | Low risk |
| Fidelity Global High Yield | Sterling High Yield | GB00B7K7SQ18 | Low risk |
| Fidelity Japan | Japan | GB00B882N041 | Medium risk |
| FSSA Greater China Growth | China/Greater China | GB0033874321 | Medium risk |
| Invesco Asian Equity Income (UK) | Asia Pacific Excluding Japan | GB00B4JR4R48 | Medium risk |
| JPM Natural Resources | Specialist | GB0031835118 | High risk |
| Liontrust Global Dividend | Global Equity Income | GB00B9225P64 | Medium risk |
| Liontrust Global Smaller Companies | Global | GB00B29MXF68 | High risk |
| Liontrust India | Specialist | GB00B1L6DV51 | High risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | Medium risk |
| Premier Miton Defensive Growth | Targeted Absolute Return | GB00B832BD89 | Low risk |
| Premier Miton Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| Premier Miton UK Smaller Companies | UK Smaller Companies | GB00B818N094 | High risk |
| T. Rowe Price Global Focused Growth Equity | Global | GB00BD446774 | Medium risk |
| Threadneedle Dynamic Real Return | Targeted Absolute Return | GB00B93TQ868 | Low risk |
| VT Tyndall North American | North America | GB00BYPZY050 | Medium 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 11% (15%)
- Alternatives 17% (17%) - includes absolute return strategies & some bond exposure
- UK Corporate Fixed Interest (i.e UK bonds) 3% (2%)
- Emerging Market Fixed Income 0% (0%)
- North American Equities 12% (12%)
- European Equities 3% (0%)
- Chinese Equities 0% (4%)
- Japanese Equities 0% (4%)
- Property 0% (0%)
- UK Equities 24% (17%)
- Gilts 0% (0%)
- Cash 5% (4%)
- Asian / Emerging market equities 10% (15%)
- Other international equities 10% (3%)
- Commodities and Energy 5% (7%)
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 a FTSE 100 tracker fund (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 40-60% 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 outperformed the average managed fund and the market.
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