80-20 Investor Best of the Best Selection – August 2017 Update

Commentary

18 funds from last month's 30 Best of the Best (BOTB) Selection regained their position in this month's shortlist. Most of those that didn't regain their place in this month's BOTB list remain in their respective Best Funds by Sector (BFBS) lists. If you look at the latest heatmap Chinese equities and emerging equities continue their outperformance buoyed by the weak dollar. Unsurprisingly they have gained a greater exposure in the BOTB this month. July was a fantastic month for the BOTB selection, making 2.27% versus 0.86% for the FTSE 100 and 0.77% for the average professional managed fund.

Interestingly Japanese equities have made a reappearance after months on the sidelines. What is interesting is that the fund in question that makes the grade is Neptune Japan Opportunities which is mostly hedged. This means that it strips out any currency exposure. If you read this month's monthly newsletter you can see the benefit of doing so. This trend of hedging is reflected in the inclusion of other hedged funds in the latest BFBS tables.

The lack of volatility in US markets has seen the US equity funds dip into the medium risk category once again. Perhaps most interesting is the exclusion of the Baillie Gifford Pacific fund from this month's BOTB. This fund has been a stellar performer and has risen within my £50,000 portfolio by more than 10%. The reason the algorithm has screened it out is that the level of risk the fund is taking versus its peers has significantly risen. As the algorithm places importance on risk levels vs performance the fund is no longer included. That's not to say it's suddenly a bad fund but it shows the propensity to become increasingly volatile. This is something I will tackle when I review my £50,000 portfolio next week.

The BOTB asset mix is even more diversified now given the inclusion of Japanese equities. The medium risk portion of the selection is now less dominated by managed funds, instead favouring funds with direct exposure to given assets. In terms of direct equity exposure the portfolio's exposure is slightly down on last month and sits at around 60%. 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 three years ago.

Below I list this month's selection in full with the 18 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.

August'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 - Emerging Markets Bond	Global Emerging Markets Bond	GB00B5L9HN22	Medium risk
Allianz - Total Return Asian Equity	Asia Pacific Excluding Japan	GB00B1FRQV53	High risk
Artemis - High Income	Sterling Strategic Bond	GB00B2PLJN71	Low risk
AXA - Framlington American Growth	North America	GB00B5LXGG05	Medium risk
AXA - Framlington UK Smaller Cos	UK Smaller Companies	GB00B7MMLM18	High risk
Baillie Gifford - American	North America	GB0006061963	Medium risk
Baillie Gifford - Corporate Bond	Sterling Strategic Bond	GB0005947741	Low risk
Baillie Gifford - Emerging Markets Growth	Global Emerging Markets	GB0006020647	High risk
Baillie Gifford - Global Select	Global	GB00BYNK7G95	Medium risk
Baillie Gifford - Greater China	China/Greater China	GB00B39RMM81	High risk
Barclays - High Income Portfolio	Mixed Investment 0-35% Shares	GB00B68F5S16	Low risk
Barclays - Income Plus Portfolio	Mixed Investment 0-35% Shares	GB00B6WYG696	Low risk
CF - Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	High risk
Consistent - Practical Investment	Mixed Investment 40-85% Shares	GB0006982671	Low risk
F&C - Property Growth and Income	Property	GB00BQWJ8687	Medium risk
Fidelity - China Consumer	China/Greater China	GB00B82ZSC67	High risk
Henderson - Fixed Interest Monthly Income	Sterling Strategic Bond	GB0001920486	Low risk
M&G - Fund of Investment Trust Shares	Global	GB0031288680	Medium risk
Man GLG - Strategic Bond	Sterling Strategic Bond	GB00B731HR48	Low risk
Man GLG - UK Income	UK Equity Income	GB00B0117B11	Medium risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	High risk
Neptune - Japan Opportunities	Japan	GB00B3Z0Y815	Medium risk
Newton - Global Emerging Markets	Global Emerging Markets	GB00BVB2Q700	High risk
Old Mutual - Asia Pacific	Asia Pacific Excluding Japan	GB00B1XG8C90	High risk
Old Mutual - UK Mid Cap	UK All Companies	GB00B1XG8963	Medium risk
Old Mutual - UK Smaller Companies	UK Smaller Companies	GB00B1XG8B83	High risk
Premier - Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Low risk
S&W - Saltus Wealth	Targeted Absolute Return	GB00B6RLZP73	Low risk
Schroder - UK Dynamic Absolute Return	Targeted Absolute Return	GB00B3N74T57	Low risk
Wise Funds Limited - TB Wise Investment	Flexible Investment	GB0034272533	Medium risk

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

Here is August'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
Artemis - High Income	Sterling Strategic Bond	GB00B2PLJN71	Low risk
Baillie Gifford - Corporate Bond	Sterling Strategic Bond	GB0005947741	Low risk
Barclays - High Income Portfolio	Mixed Investment 0-35% Shares	GB00B68F5S16	Low risk
Barclays - Income Plus Portfolio	Mixed Investment 0-35% Shares	GB00B6WYG696	Low risk
Consistent - Practical Investment	Mixed Investment 40-85% Shares	GB0006982671	Low risk
Henderson - Fixed Interest Monthly Income	Sterling Strategic Bond	GB0001920486	Low risk
Man GLG - Strategic Bond	Sterling Strategic Bond	GB00B731HR48	Low risk
Premier - Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Low risk
S&W - Saltus Wealth	Targeted Absolute Return	GB00B6RLZP73	Low risk
Schroder - UK Dynamic Absolute Return	Targeted Absolute Return	GB00B3N74T57	Low risk
Aberdeen - Emerging Markets Bond	Global Emerging Markets Bond	GB00B5L9HN22	Medium risk
AXA - Framlington American Growth	North America	GB00B5LXGG05	Medium risk
Baillie Gifford - American	North America	GB0006061963	Medium risk
Baillie Gifford - Global Select	Global	GB00BYNK7G95	Medium risk
F&C - Property Growth and Income	Property	GB00BQWJ8687	Medium risk
M&G - Fund of Investment Trust Shares	Global	GB0031288680	Medium risk
Man GLG - UK Income	UK Equity Income	GB00B0117B11	Medium risk
Neptune - Japan Opportunities	Japan	GB00B3Z0Y815	Medium risk
Old Mutual - UK Mid Cap	UK All Companies	GB00B1XG8963	Medium risk
Wise Funds Limited - TB Wise Investment	Flexible Investment	GB0034272533	Medium risk
Allianz - Total Return Asian Equity	Asia Pacific Excluding Japan	GB00B1FRQV53	High risk
AXA - Framlington UK Smaller Cos	UK Smaller Companies	GB00B7MMLM18	High risk
Baillie Gifford - Emerging Markets Growth	Global Emerging Markets	GB0006020647	High risk
Baillie Gifford - Greater China	China/Greater China	GB00B39RMM81	High risk
CF - Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	High risk
Fidelity - China Consumer	China/Greater China	GB00B82ZSC67	High risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	High risk
Newton - Global Emerging Markets	Global Emerging Markets	GB00BVB2Q700	High risk
Old Mutual - Asia Pacific	Asia Pacific Excluding Japan	GB00B1XG8C90	High risk
Old Mutual - UK Smaller Companies	UK Smaller Companies	GB00B1XG8B83	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
Baillie Gifford - European	Europe Excluding UK	GB0006058258	High risk
Baillie Gifford - Global Income Growth	Global Equity Income	GB0005772586	Medium risk
Baillie Gifford - Managed	Mixed Investment 40-85% Shares	GB0006010168	Medium risk
Baillie Gifford - Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
Fundsmith - Equity	Global	GB00B4Q5X527	Medium risk
JPM - Asia	Asia Pacific Excluding Japan	GB0030879695	High risk
Jupiter - Fund of Investment Trusts	Global	GB0004795034	Medium risk
Schroder - High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Schroder - UK Dynamic Smaller Companies	UK Smaller Companies	GB0007220360	Medium risk
T. Bailey - Dynamic	Mixed Investment 20-60% Shares	GB00B1385S07	Low risk
Unicorn - Mastertrust	Flexible Investment	GB0031269367	Medium risk
Wise Investments - TB Wise Income	Flexible Investment	GB00B0LJ0160	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 16% (14%)
• Alternatives 17% (17%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 0% (0%)
• Emerging Market Fixed Interest 3% (3%)
• North American Equities 10% (8%)
• European Equities 7% (9%)
• Japanese Equities 4% (0%)
• Property 0% (0%)
• UK Equities 19% (23%)
• Cash 4% (5%)
• Asian equities 7% (7%)
• Asia Pacific Emerging equities 13% (9%)
• Other international equities 0% (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. 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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