Commentary
As discussed in August's monthly newsletter, July was a stellar month for UK investors and continued an unseasonably strong summer run for developed world equities. Chinese equities and Asian equities continued to lag and it's no wonder that these sectors are once again absent from the BOTB selection.
If you look at the latest heatmap you can see that the divergence of returns across assets and risk levels continues. The cause of the divergence still lies with the escalating trade war between the US and China. European equities had a strong July which was largely the result of a trade war truce between America and Europe. The fact that European equities have a slight value bias, a style that has outperformed growth-oriented stocks recently, also helped. By way of example, Aberdeen European Equity, from last month's BOTB, rose 4.74% in July. The trade war continues to shape stock markets and the BOTB with the overriding theme of favouring more developed equity markets. As such the exposure to Japanese equity funds has fallen for the first time in a number of months as the strengthening yen (often a haven in times of uncertainty) has taken its toll on Japanese export-oriented stocks. The BOTB once again contains smaller companies funds which is a reflection of investors' continued preference for domestically focused stocks in the face of the escalating trade war.
A number of UK bond funds have crept back into the low-risk part of the BOTB. While bond funds continue their lacklustre form there are few other low-risk alternatives that have provided a positive return.
In July's BOTB there are 15 funds that have 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 this month's BOTB remain in their respective BFBS shortlists.
In terms of direct equity exposure, the BOTB's exposure has risen back to 62%, up from 57% last month. 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 four years ago.
Below I list this month's selection in full with the 15 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 European Equity | Europe Excluding UK | GB00B0LG6P37 | Medium risk |
| AXA Framlington American Growth | North America | GB00B5LXGG05 | High risk |
| AXA Framlington Global Technology | Technology & Telecommunication | GB00B4W52V57 | High risk |
| AXA Sterling Credit Short Duration Bond | Sterling Corporate Bond | GB00B5VLK178 | Low risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Barclays Sterling Bond | Sterling Strategic Bond | GB00B72Y6K08 | Low risk |
| CFP SDL UK Buffettology | UK All Companies | GB00B3QQFJ66 | Medium risk |
| Fidelity Global Property | Property | GB00B7K2NZ09 | High risk |
| Fidelity Short Dated Corporate Bond | Sterling Corporate Bond | GB00BDCG0G22 | Low risk |
| First State Global Property Securities | Property | GB00B1F76L55 | High risk |
| iShares UK Gilts All Stocks Index (UK) | UK Gilts | GB00B83HGR24 | Low risk |
| Janus Henderson US Growth | North America | GB0032438466 | High risk |
| JPM Global High Yield Bond | Sterling High Yield | GB0008350976 | Low risk |
| JPM Japan | Japan | GB0030879471 | High risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | Medium risk |
| L&G Global Health & Pharmaceuticals Index Trust | Global | GB00B0CNH387 | High risk |
| LF Miton European Opportunities | Europe Excluding UK | GB00BZ2K2M84 | Medium risk |
| Liontrust Sustainable Future Absolute Growth | Flexible Investment | GB0030029622 | Medium risk |
| McInroy & Wood Smaller Companies | Global | GB00B8NC4D98 | Medium risk |
| Neptune Global Technology | Technology & Telecommunication | GB00BYXZ5N79 | High risk |
| Newton Real Return | Targeted Absolute Return | GB0001642635 | Low risk |
| Premier UK Growth | UK All Companies | GB0031639221 | Medium risk |
| Royal London European Growth Trust | Europe Excluding UK | GB0009537407 | Medium risk |
| S&W Saltus Multi Asset Class | Targeted Absolute Return | GB00B43T2834 | Low risk |
| Standard Life Investments AAA Income | Sterling Corporate Bond | GB00B3W48X95 | Low risk |
| Standard Life Investments Global Smaller Companies | Global | GB00B7KVX245 | Medium risk |
| Standard Life Investments Higher Income | Sterling High Yield | GB00B79RR984 | Low risk |
| Threadneedle UK Equity Alpha Income | UK Equity Income | GB00B12WJY78 | High risk |
| VT Castlebay UK Equity | UK All Companies | GB00BV0LF607 | Medium risk |
| VT Tcam Income Portfolio | Mixed Investment 0-35% Shares | GB00B9L4H242 | Low 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 |
| AXA Sterling Credit Short Duration Bond | Sterling Corporate Bond | GB00B5VLK178 | Low risk |
| Barclays Sterling Bond | Sterling Strategic Bond | GB00B72Y6K08 | Low risk |
| Fidelity Short Dated Corporate Bond | Sterling Corporate Bond | GB00BDCG0G22 | Low risk |
| iShares UK Gilts All Stocks Index (UK) | UK Gilts | GB00B83HGR24 | Low risk |
| JPM Global High Yield Bond | Sterling High Yield | GB0008350976 | Low risk |
| Newton Real Return | Targeted Absolute Return | GB0001642635 | Low risk |
| S&W Saltus Multi Asset Class | Targeted Absolute Return | GB00B43T2834 | Low risk |
| Standard Life Investments AAA Income | Sterling Corporate Bond | GB00B3W48X95 | Low risk |
| Standard Life Investments Higher Income | Sterling High Yield | GB00B79RR984 | Low risk |
| VT Tcam Income Portfolio | Mixed Investment 0-35% Shares | GB00B9L4H242 | Low risk |
| Aberdeen European Equity | Europe Excluding UK | GB00B0LG6P37 | Medium risk |
| CFP SDL UK Buffettology | UK All Companies | GB00B3QQFJ66 | Medium risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | Medium risk |
| LF Miton European Opportunities | Europe Excluding UK | GB00BZ2K2M84 | Medium risk |
| Liontrust Sustainable Future Absolute Growth | Flexible Investment | GB0030029622 | Medium risk |
| McInroy & Wood Smaller Companies | Global | GB00B8NC4D98 | Medium risk |
| Premier UK Growth | UK All Companies | GB0031639221 | Medium risk |
| Royal London European Growth Trust | Europe Excluding UK | GB0009537407 | Medium risk |
| Standard Life Investments Global Smaller Companies | Global | GB00B7KVX245 | Medium risk |
| VT Castlebay UK Equity | UK All Companies | GB00BV0LF607 | Medium risk |
| AXA Framlington American Growth | North America | GB00B5LXGG05 | High risk |
| AXA Framlington Global Technology | Technology & Telecommunication | GB00B4W52V57 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Fidelity Global Property | Property | GB00B7K2NZ09 | High risk |
| First State Global Property Securities | Property | GB00B1F76L55 | High risk |
| Janus Henderson US Growth | North America | GB0032438466 | High risk |
| JPM Japan | Japan | GB0030879471 | High risk |
| L&G Global Health & Pharmaceuticals Index Trust | Global | GB00B0CNH387 | High risk |
| Neptune Global Technology | Technology & Telecommunication | GB00BYXZ5N79 | High risk |
| Threadneedle UK Equity Alpha Income | UK Equity Income | GB00B12WJY78 | 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 |
| Aberdeen UK Property | Property | GB00BTLX1F24 | Low risk |
| Baillie Gifford Japanese Income Growth | Japan | GB00BYZJQG71 | Medium risk |
| Baillie Gifford UK Equity Alpha | UK All Companies | GB0005858195 | High risk |
| BlackRock European Absolute Alpha | Targeted Absolute Return | GB00B4Y62W78 | Low risk |
| Jupiter Japan Income | Japan | GB00B0HZTZ55 | Medium risk |
| LF Canlife Managed 0%-35% | Mixed Investment 0-35% Shares | GB00BZ005541 | Low risk |
| Newton International Bond | Global Bonds | GB0006779655 | Medium risk |
| Royal London Short Duration Credit | Sterling Strategic Bond | GB00BD050949 | Low risk |
| Schroder Global Equity Income | Global Equity Income | GB00B76V7M69 | Medium risk |
| Schroder Income | UK Equity Income | GB00B3PM1190 | High risk |
| Schroder MM Diversity Income | Mixed Investment 20-60% Shares | GB00B4K1MN77 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Standard Life Investments UK Gilt | UK Gilts | GB00B6WZXS38 | Low risk |
| Standard Life Investments UK Real Estate | Property | GB00BYPHP536 | Low risk |
| Unicorn Outstanding British Companies | UK All Companies | GB00B1GFWW16 | 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 13% (12%)
- Alternatives 14% (17%) - includes absolute return strategies & property
- UK Corporate Fixed Interest (i.e UK bonds) 8% (0%)
- Emerging Market Fixed Interest 0% (0%)
- North American Equities 19% (16%)
- European Equities 13% (12%)
- Japanese Equities 4% (11%)
- Property 7% (10%)
- UK Equities 19% (17%)
- UK Gilts 3% (0%)
- Cash 0% (4%)
- Asian equities 0% (1%)
- Asia Pacific Emerging equities 0% (0%)
- Other international equities 0% (0%)
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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