Commentary
19 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.
November was an interesting month for investors as I discussed in this month's newsletter. Just days before the end of November the BOTB selection was up by an average of 1.5% before global stock markets started to slide. In the end the BOTB finished just in positive territory which was a good result if you consider that the average managed fund lost 0.2% in November and the FTSE 100 was down 1.79%. The market jitters that characterised the last few days of November threaten to set the tone for December. If you look at the list of funds that have dropped out of the BOTB (and those that also fell out of the BFBS) they included those with a high weighting to technology stocks. The rotation out of technology stocks by US traders became prominent at the end of November and it looks like we are seeing a similar pattern starting to emerge in the BOTB.
There has been continued weakness in European equities recently so it's unsurprisingly that the last remnant of exposure in the BOTB has gone. By contrast Japanese equities have been a particular bright spot as can be seen in the latest heatmap and the level of exposure in the BOTB has increased. With the pound rallying to a two month high due to receding Brexit angsts the currency hedged Japanese funds have fared well. In fact hedged equity exposure has crept in elsewhere (namely via global funds).
As we move from November into December a number of the high risk funds (investing in the Far East) have now fallen more than 5% from their high points in November. The slump in Asian equities (in particularly in China) remains an unfolding trend, although the slump has slowed, so it will be interesting to see how that plays out. These funds remain in this month's BOTB as 80-20 Investor looks at recent momentum over a period of months which places the week's equity market falls into a wider context.
While the BOTB asset mix continues to be diversified the medium risk part of the selection now has less funds with direct equity exposure and instead includes a number of managed multi-asset funds. In terms of direct equity exposure the portfolio's exposure sits around 60-65%. 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 19 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.
December'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 |
| 7IM US Equity Value | North America | GB00BWBSHX88 | High risk |
| Baillie Gifford High Yield Bond | Sterling High Yield | GB0030816713 | Low risk |
| Baillie Gifford Japanese | Japan | GB0006011133 | High risk |
| Baring Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | High risk |
| BlackRock US Dynamic | North America | GB00B87XJQ69 | Medium risk |
| CF Livingbridge UK Micro Cap | UK Smaller Companies | GB00BV9FYS80 | Medium risk |
| CF Miton Cautious Multi Asset | Mixed Investment 20-60% Shares | GB00B0W1V856 | Low risk |
| CFP SDL UK Buffettology | UK All Companies | GB00B3QQFJ66 | Medium risk |
| FP Apollo Multi Asset Balanced | Mixed Investment 20-60% Shares | GB00B3FPF276 | Low risk |
| FP Apollo Multi Asset Cautious | Mixed Investment 20-60% Shares | GB00B3FPDY55 | Low risk |
| Henderson China Opportunities | China/Greater China | GB0031860934 | High risk |
| JPM Asia Growth | Asia Pacific Excluding Japan | GB0030879695 | High risk |
| JPM Global Macro Balanced | Mixed Investment 0-35% Shares | GB00B09RGK38 | Low risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | Medium risk |
| L&G High Income Trust | Sterling High Yield | GB00B0CNHJ41 | Low risk |
| Legg Mason IF Martin Currie Japan Alpha | Japan | GB00BVZ6V950 | High risk |
| Man GLG Strategic Bond | Sterling Strategic Bond | GB00B731HR48 | Low risk |
| Neptune Global Equity | Global | GB00B8DLY478 | Medium risk |
| Neptune Japan Opportunities | Japan | GB00B3Z0Y815 | Medium risk |
| Old Mutual Asia Pacific | Asia Pacific Excluding Japan | GB00B1XG8C90 | High risk |
| Premier Diversified | Mixed Investment 40-85% Shares | GB00B8BJV423 | Low risk |
| Sarasin Global Dividend (Sterling Hedged) | Global Equity Income | GB00BGDF8439 | Medium risk |
| Schroder High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Slater Recovery | UK All Companies | GB0031554248 | Medium risk |
| Standard Life Investments Global Emerging Markets Equity Income | Global Emerging Markets | GB00B8B02G41 | High risk |
| Standard Life Investments Global Smaller Companies | Global | GB00B7KVX245 | Medium risk |
| T. Bailey Dynamic | Mixed Investment 20-60% Shares | GB00B1385S07 | Low risk |
| Threadneedle China Opportunities | China/Greater China | GB00B1PRW734 | High risk |
| TM Cavendish AIM | UK Smaller Companies | GB00B0JX3Z52 | High risk |
| Wise Funds Limited TB Wise Multi-Asset Growth | Flexible Investment | GB0034272533 | Medium risk |
December's Best of the Best Selection - (grouped by risk)
Here is December'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 |
| JPM Global Macro Balanced | Mixed Investment 0-35% Shares | GB00B09RGK38 | Low risk |
| Premier Diversified | Mixed Investment 40-85% Shares | GB00B8BJV423 | Low risk |
| Baillie Gifford High Yield Bond | Sterling High Yield | GB0030816713 | Low risk |
| FP Apollo Multi Asset Balanced | Mixed Investment 20-60% Shares | GB00B3FPF276 | Low risk |
| FP Apollo Multi Asset Cautious | Mixed Investment 20-60% Shares | GB00B3FPDY55 | Low risk |
| T. Bailey Dynamic | Mixed Investment 20-60% Shares | GB00B1385S07 | Low risk |
| CF Miton Cautious Multi Asset | Mixed Investment 20-60% Shares | GB00B0W1V856 | Low risk |
| L&G High Income Trust | Sterling High Yield | GB00B0CNHJ41 | Low risk |
| Schroder High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Man GLG Strategic Bond | Sterling Strategic Bond | GB00B731HR48 | Low risk |
| Neptune Japan Opportunities | Japan | GB00B3Z0Y815 | Medium risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | Medium risk |
| Neptune Global Equity | Global | GB00B8DLY478 | Medium risk |
| Standard Life Investments Global Smaller Companies | Global | GB00B7KVX245 | Medium risk |
| CFP SDL UK Buffettology | UK All Companies | GB00B3QQFJ66 | Medium risk |
| Slater Recovery | UK All Companies | GB0031554248 | Medium risk |
| CF Livingbridge UK Micro Cap | UK Smaller Companies | GB00BV9FYS80 | Medium risk |
| Sarasin Global Dividend (Sterling Hedged) | Global Equity Income | GB00BGDF8439 | Medium risk |
| BlackRock US Dynamic | North America | GB00B87XJQ69 | Medium risk |
| Wise Funds Limited TB Wise Multi-Asset Growth | Flexible Investment | GB0034272533 | Medium risk |
| Baring Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | High risk |
| Henderson China Opportunities | China/Greater China | GB0031860934 | High risk |
| Threadneedle China Opportunities | China/Greater China | GB00B1PRW734 | High risk |
| Old Mutual Asia Pacific | Asia Pacific Excluding Japan | GB00B1XG8C90 | High risk |
| Baillie Gifford Japanese | Japan | GB0006011133 | High risk |
| JPM Asia Growth | Asia Pacific Excluding Japan | GB0030879695 | High risk |
| Legg Mason IF Martin Currie Japan Alpha | Japan | GB00BVZ6V950 | High risk |
| Standard Life Investments Global Emerging Markets Equity Income | Global Emerging Markets | GB00B8B02G41 | High risk |
| 7IM US Equity Value | North America | GB00BWBSHX88 | High risk |
| TM Cavendish AIM | UK Smaller Companies | GB00B0JX3Z52 | 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 |
| Artemis High Income | Sterling Strategic Bond | GB00B2PLJN71 | Low risk |
| Artemis US Select | North America | GB00BMMV5105 | Medium risk |
| Baillie Gifford American | North America | GB0006061963 | Medium risk |
| Baillie Gifford Emerging Markets Growth | Global Emerging Markets | GB0006020647 | High risk |
| Baillie Gifford Global Discovery | Global | GB0006059330 | Medium risk |
| F&C Property Growth and Income | Property | GB00BQWJ8687 | Low risk |
| Fidelity China Consumer | China/Greater China | GB00B82ZSC67 | High risk |
| Henderson Global Technology | Technology & Telecommunication | GB0007698847 | High risk |
| Liontrust Sustainable Future Absolute Growth | Flexible Investment | GB0030029622 | Medium risk |
| Man GLG UK Income | UK Equity Income | GB00B0117B11 | Medium risk |
| Standard Life Investments UK Equity Unconstrained | UK All Companies | GB00B7LK2232 | 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% (14%)
- Alternatives 20% (13%) - includes absolute return strategies & property
- UK Corporate Fixed Interest (i.e UK bonds) 0% (4%)
- Emerging Market Fixed Interest 0% (0%)
- North American Equities 10% (17%)
- European Equities 0% (3%)
- Japanese Equities 11% (8%)
- Property 0% (0%)
- UK Equities 17% (17%)
- Cash 5% (4%)
- Asian equities 9% (6%)
- Asia Pacific Emerging equities 10% (11%)
- Other international equities 5% (3%)
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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