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

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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