Commentary
In contrast to last time, the changes to the BOTB were much less marked. In fact, 19 funds from November's BOTB made it into December's. While the overall equity exposure has increased slightly from 44% to around 55% it is still cautious by historical standards. The cautious stance is also reflected in the fund choices themselves. Defensive equity income funds dominate the medium risk portion of the BOTB exposure. As well as being globally diversified these funds tend to also be less exposed to economically sensitive sectors. Instead, favouring pharmaceuticals and consumer staples (things that people buy even in a recession). This has helped them outperform their peers and avoid the worst (but obviously not all) of the equity sell-off since October as concerns over slowing global economic growth increase.
As you can see from this month's heatmap during November risk assets fared better than they did in October and emerging markets received a boost from more dovish soundbites emanating from the US Federal Reserve.
The BOTB continues to be devoid of Japanese stocks but a small exposure to Asian stocks has crept it. There continues to be a nod to dollar strength (Newton International Bond is something of a dollar/GBP proxy albeit also influenced by bond movements) which is a trade that has performed well during the autumn unease.
The exposure to property funds that invest in actual buildings (rather than equities) has risen again and my continued concern regarding the liquidity of property funds (and why I don’t personally hold them in my £50k portfolio), if a Brexit deal is eventually forged, may prove overly cautious. Finally, the BOTB's cash position has increased to 5%.
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 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 |
| Aberdeen UK Property | UK Direct Property | GB00BTLX1F24 | Low risk |
| BlackRock European Absolute Alpha | Targeted Absolute Return | GB00B4Y62W78 | Low risk |
| Carvetian Electric & General Investment | Global | GB00B52CBS38 | High risk |
| Close Diversified Income Portfolio | Mixed Investment 20-60% Shares | GB00B708TJ43 | Low risk |
| Fidelity American | North America | GB00B8GPC429 | High risk |
| Fidelity American Special Situations | North America | GB00B89ST706 | High risk |
| Fidelity Global Dividend | Global Equity Income | GB00B7GJPN73 | Medium risk |
| Fidelity Multi Asset Allocator Growth | Mixed Investment 40-85% Shares | GB00B9C3GS90 | Medium risk |
| Fidelity Multi Asset Income & Growth | Mixed Investment 40-85% Shares | GB00BGFBN227 | Low risk |
| JPM US Equity Income | North America | GB00B3FJQ045 | High risk |
| L&G Global Health & Pharmaceuticals Index Trust | Global | GB00B0CNH387 | High risk |
| LF Canlife North American | North America | GB00B73N3278 | High risk |
| Man GLG Corporate Bond | Global Bonds | GB00B0118B85 | Low risk |
| Morgan Stanley Global Brands | Global | GB0032482498 | High risk |
| Newton Asian Income | Asia Pacific Excluding Japan | GB00B0MY6Z69 | Medium risk |
| Newton Global Income | Global Equity Income | GB00B0MY6T00 | Medium risk |
| Newton International Bond | Global Bonds | GB0006779655 | Low risk |
| Sarasin Global Higher Dividend | Global Equity Income | GB00B84ZSV39 | Medium risk |
| Schroder Global Healthcare | Global | GB00B76V7Q08 | High risk |
| Standard Life Investments Emerging Market Debt | Global Emerging Markets Bond | GB00B8K56P77 | Medium risk |
| Standard Life Investments Global Real Estate | Property Other | GB00B774LD38 | Low risk |
| Standard Life Investments UK Real Estate | UK Direct Property | GB00BYPHP536 | Low risk |
| TB Evenlode Global Income | Global Equity Income | GB00BF1QMV61 | Medium risk |
| Thesis TM Sanditon European | Europe Excluding UK | GB00BNY7YH21 | Medium risk |
| Thesis TM Sanditon European Select | Targeted Absolute Return | GB00BNY7Y722 | High risk |
| Thesis TM Sanditon UK Select | Targeted Absolute Return | GB00BNY7YM73 | Medium risk |
| TIME Investments Commercial Freehold | UK Direct Property | GB00BLRZPX27 | Low risk |
| Troy Asset Management Ltd Trojan | Flexible Investment | GB0034243732 | Low risk |
| Troy Asset Management Ltd Trojan Global Equity | Global | GB00B0ZJ5S47 | High risk |
| Troy Asset Management Ltd Trojan Global Income | Global Equity Income | GB00BD82KP33 | 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 |
| Aberdeen UK Property | UK Direct Property | GB00BTLX1F24 | Low risk |
| BlackRock European Absolute Alpha | Targeted Absolute Return | GB00B4Y62W78 | Low risk |
| Close Diversified Income Portfolio | Mixed Investment 20-60% Shares | GB00B708TJ43 | Low risk |
| Fidelity Multi Asset Income & Growth | Mixed Investment 40-85% Shares | GB00BGFBN227 | Low risk |
| Man GLG Corporate Bond | Global Bonds | GB00B0118B85 | Low risk |
| Newton International Bond | Global Bonds | GB0006779655 | Low risk |
| Standard Life Investments Global Real Estate | Property Other | GB00B774LD38 | Low risk |
| Standard Life Investments UK Real Estate | UK Direct Property | GB00BYPHP536 | Low risk |
| TIME Investments Commercial Freehold | UK Direct Property | GB00BLRZPX27 | Low risk |
| Troy Asset Management Ltd Trojan | Flexible Investment | GB0034243732 | Low risk |
| Fidelity Global Dividend | Global Equity Income | GB00B7GJPN73 | Medium risk |
| Fidelity Multi Asset Allocator Growth | Mixed Investment 40-85% Shares | GB00B9C3GS90 | Medium risk |
| Newton Asian Income | Asia Pacific Excluding Japan | GB00B0MY6Z69 | Medium risk |
| Newton Global Income | Global Equity Income | GB00B0MY6T00 | Medium risk |
| Sarasin Global Higher Dividend | Global Equity Income | GB00B84ZSV39 | Medium risk |
| Standard Life Investments Emerging Market Debt | Global Emerging Markets Bond | GB00B8K56P77 | Medium risk |
| TB Evenlode Global Income | Global Equity Income | GB00BF1QMV61 | Medium risk |
| Thesis TM Sanditon European | Europe Excluding UK | GB00BNY7YH21 | Medium risk |
| Thesis TM Sanditon UK Select | Targeted Absolute Return | GB00BNY7YM73 | Medium risk |
| Troy Asset Management Ltd Trojan Global Income | Global Equity Income | GB00BD82KP33 | Medium risk |
| Carvetian Electric & General Investment | Global | GB00B52CBS38 | High risk |
| Fidelity American | North America | GB00B8GPC429 | High risk |
| Fidelity American Special Situations | North America | GB00B89ST706 | High risk |
| JPM US Equity Income | North America | GB00B3FJQ045 | High risk |
| L&G Global Health & Pharmaceuticals Index Trust | Global | GB00B0CNH387 | High risk |
| LF Canlife North American | North America | GB00B73N3278 | High risk |
| Morgan Stanley Global Brands | Global | GB0032482498 | High risk |
| Schroder Global Healthcare | Global | GB00B76V7Q08 | High risk |
| Thesis TM Sanditon European Select | Targeted Absolute Return | GB00BNY7Y722 | High risk |
| Troy Asset Management Ltd Trojan Global Equity | Global | GB00B0ZJ5S47 | 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 |
| AXA Sterling Index Linked Bond | UK Index Linked Gilts | GB00B02Y6B22 | Medium risk |
| BlackRock US Dynamic | North America | GB00B87XJQ69 | High risk |
| L&G Global Technology Index Trust | Technology & Telecommunications | GB00B0CNH163 | High risk |
| M&G Index-Linked Bond | UK Index Linked Gilts | GB0031111478 | Medium risk |
| Neptune US Income | North America | GB00B909H978 | High risk |
| Royal London Index Linked | UK Index Linked Gilts | GB00B8DDWW71 | Medium risk |
| Standard Life Investments AAA Income | Sterling Corporate Bond | GB00B3W48X95 | Low risk |
| TB Evenlode Income | UK All Companies | GB00BD0B7D55 | Medium risk |
| Threadneedle Global Bond | Global Bonds | GB0001533685 | Low risk |
| UBS S&P 500 Index | North America | GB00BMN91T34 | High 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 10% (18%)
- Alternatives 20% (19%) - includes absolute return strategies & property
- UK Corporate Fixed Interest (i.e UK bonds) 0% (7%)
- Emerging Market Fixed Interest 0% (0%)
- North American Equities 26% (28%)
- European Equities 8% (5%)
- Japanese Equities 0% (0%)
- Property 10% (12%)
- UK Equities 8% (7%)
- Cash 5% (0%)
- Asian equities 2% (0%)
- Asia Pacific Emerging equities 0% (0%)
- Other international equities 11% (4%)
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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