80-20 Investor Best of the Best Selection – August 2020 Update

Commentary

August’s BOTB once again has a familiar air about it with 22 funds from July’s BOTB retaining their place. Once again it demonstrates the resilience and performance of the funds within the BOTB selection over the last few months.

The average return from the BOTB for the month of July was 1.6% which again is impressive when you consider that the portfolio only had a 48% exposure to equities. Comparable professionally managed funds on average returned between 0.09% and 0.39% as shown in the chart below. As I pointed out last time, comparing against the Mixed Investment 40-85% Shares sector average is not a fair comparison for the BOTB given that most funds within the aforementioned sector have up to 85% exposure to equities. But it once again demonstrates that in a month when equity markets continued to rally, and you would, therefore have expected the sector average for the Mixed Investment 40-85% Shares sector to outperform, the BOTB produced a better return.

Interestingly during July it wasn't just the BOTB’s exposure to US tech stocks that drove the outperformance but also its exposure to Chinese equities. Baillie Gifford Positive Return once again had a strong month along with other recent BOTB top performers, such as Baillie Gifford China and Baillie Gifford Long Term Global Growth Investment.

Name	% return in July
Baillie Gifford Positive Change	8.67
LF Miton UK Smaller Companies	7.84
Allianz Total Return Asian Equity	6.48
Baillie Gifford European	5.17
Baillie Gifford Long Term Global Growth Investment	4.86
Baillie Gifford China	3.7

 

Interestingly the Baillie Gifford China fund has now dropped out of the BFBS and BOTB tables. The reason for this is not because it's suddenly become a bad fund, Far from it in fact as its performance figures show that it is still performing strongly. The reason for its omission is that the risk monitoring built into the 80-20 Investor algorithm screened it out. The algorithm always looks at the level of risk a fund is taking relative to its peers and those deemed to be taking excess risk are excluded.

At the other end of the monthly performance table only 5 of July's BOTB funds didn't make money during the month of July, these are shown below. Interestingly they include JPM Japan and three global bond funds. All of these have been negatively impacted by the recent weakness in the value of the US dollar. In fact, it is almost singlehandedly the reason for their lacklustre performance.

Name	% return in July
LF Canlife Global Macro Bond	-1.41
Threadneedle Global Bond	-2.75
BNY Mellon International Bond Sterling	-2.83
JPM Japan	-3.53
AXA Framlington Biotech	-5.8

 

Overall it's not surprising that the BOTB's asset mix has remained almost the same as last month, with an equity exposure of around 48%. Most of this exposure is still via US equities and bonds with growing exposure to Asian equities. UK equities continue to remain almost absent which is a reflection of the fact that the UK stock market continues to lag its peers. In fact, the FTSE 100 reentered a bear market last week.

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 years ago.

Below I list this month's selection in full with the 22 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
Allianz Strategic Bond	Sterling Strategic Bond	GB00B06T9362	Low risk
Allianz Total Return Asian Equity	Asia Pacific Excluding Japan	GB00B1FRQV53	Medium risk
ASI AAA Bond	Sterling Corporate Bond	GB00B3W48X95	Low risk
ASI UK Government Bond	UK Gilts	GB00B6WZXS38	Low risk
AXA Framlington Global Technology	Technology & Telecommunications	GB00B4W52V57	High risk
AXA Sterling Strategic Bond	Sterling Strategic Bond	GB00B02Y6L20	Low risk
Baillie Gifford European	Europe Excluding UK	GB0006058258	High risk
Baillie Gifford Long Term Global Growth Investment	Global	GB00BD5Z0Z54	High risk
Baillie Gifford Managed	Mixed Investment 40-85% Shares	GB0006010168	Medium risk
Baillie Gifford Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
Baillie Gifford Positive Change	Global	GB00BYVGKV59	High risk
Barclays Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Low risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
BNY Mellon International Bond	Global Bonds	GB0006779655	Medium risk
Franklin UK Gilt	UK Gilts	GB00BYZCTV27	Medium risk
Invesco China Equity (UK)	China/Greater China	GB00B3RW8C79	High risk
Invesco Global Focus (UK)	Global	GB00B3KJYG12	High risk
JPM Global Macro	Targeted Absolute Return	GB00B09RGL45	Low risk
JPM Japan	Japan	GB00B1XMTP77	Medium risk
LF Canlife Global Macro Bond	Global Bonds	GB00B4LW2X97	Low risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	High risk
Merian Global Strategic Bond	Sterling Strategic Bond	GB00B1XG7L17	Low risk
Morgan Stanley US Advantage	North America	GB00BZ4CG750	High risk
Royal London Sustainable World Trust	Mixed Investment 40-85% Shares	GB00B882H241	Medium risk
Royal London UK Government Bond	UK Gilts	GB00B881TW52	Medium risk
Schroder Global Healthcare	Global	GB00B76V7Q08	Medium risk
T. Rowe Price Dynamic Global Bond	Global Bonds	GB00BD0NLR34	Low risk
T. Rowe Price Global Technology Equity	Technology & Telecommunications	GB00BD446K01	High risk
Threadneedle Global Bond	Global Bonds	GB0001533685	Medium risk
Troy Asset Management Ltd Trojan Ethical	Flexible Investment	GB00BJP0XX17	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
Allianz Strategic Bond	Sterling Strategic Bond	GB00B06T9362	Low risk
ASI AAA Bond	Sterling Corporate Bond	GB00B3W48X95	Low risk
ASI UK Government Bond	UK Gilts	GB00B6WZXS38	Low risk
AXA Sterling Strategic Bond	Sterling Strategic Bond	GB00B02Y6L20	Low risk
Barclays Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Low risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
JPM Global Macro	Targeted Absolute Return	GB00B09RGL45	Low risk
LF Canlife Global Macro Bond	Global Bonds	GB00B4LW2X97	Low risk
Merian Global Strategic Bond	Sterling Strategic Bond	GB00B1XG7L17	Low risk
T. Rowe Price Dynamic Global Bond	Global Bonds	GB00BD0NLR34	Low risk
Allianz Total Return Asian Equity	Asia Pacific Excluding Japan	GB00B1FRQV53	Medium risk
Baillie Gifford Managed	Mixed Investment 40-85% Shares	GB0006010168	Medium risk
BNY Mellon International Bond	Global Bonds	GB0006779655	Medium risk
Franklin UK Gilt	UK Gilts	GB00BYZCTV27	Medium risk
JPM Japan	Japan	GB00B1XMTP77	Medium risk
Royal London Sustainable World Trust	Mixed Investment 40-85% Shares	GB00B882H241	Medium risk
Royal London UK Government Bond	UK Gilts	GB00B881TW52	Medium risk
Schroder Global Healthcare	Global	GB00B76V7Q08	Medium risk
Threadneedle Global Bond	Global Bonds	GB0001533685	Medium risk
Troy Asset Management Ltd Trojan Ethical	Flexible Investment	GB00BJP0XX17	Medium risk
AXA Framlington Global Technology	Technology & Telecommunications	GB00B4W52V57	High risk
Baillie Gifford European	Europe Excluding UK	GB0006058258	High risk
Baillie Gifford Long Term Global Growth Investment	Global	GB00BD5Z0Z54	High risk
Baillie Gifford Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
Baillie Gifford Positive Change	Global	GB00BYVGKV59	High risk
Invesco China Equity (UK)	China/Greater China	GB00B3RW8C79	High risk
Invesco Global Focus (UK)	Global	GB00B3KJYG12	High risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	High risk
Morgan Stanley US Advantage	North America	GB00BZ4CG750	High risk
T. Rowe Price Global Technology Equity	Technology & Telecommunications	GB00BD446K01	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 Gilt Yield	UK Gilts	GB0031383283	Medium risk
ASI (AAM) Sterling Government Bond	UK Gilts	GB00BWK26Q79	Low risk
AXA Framlington Biotech	Specialist	GB00B784NS11	High risk
Baillie Gifford China	China/Greater China	GB00B39RMM81	High risk
Liontrust Global Technology	Technology & Telecommunications	GB00BYXZ5N79	High risk
Liontrust Sustainable Future Managed Growth	Flexible Investment	GB0030029622	Medium risk
Rathbone Global Opportunities Fund	Global	GB0030349095	Medium risk
Vanguard LifeStrategy 20% Equity	Mixed Investment 0-35% Shares	GB00B4NXY349	Low 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 28% (30%)
• Alternatives 7% (6%) - includes absolute return strategies & some bond exposure
• UK Corporate Fixed Interest (i.e UK bonds) 4% (0%)
• Emerging Market Fixed Income 0% (0%)
• North American Equities 20% (22%)
• European Equities 9% (7%)
• Japanese Equities 4% (4%)
• Property 0% (0%)
• UK Equities 5% (4%)
• Gilts 9% (12%)
• Cash 4% (4%)
• Emerging market equities 3% (0%)
• Other international equities 0% (4%)
• Asian Equities 7% (7%)
• Commodities and Energy 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 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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