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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