80-20 Investor Best of the Best Selection - February 2016 Update

A total of 13 funds from January's 27 funds make it into February's selection. Below I list this month's selection in full with the 13 funds that regained their place in black while the new additions are in green.

Just as last time, I have included the full list sorted alphabetically by name and then by risk category.

February'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)

Fund	Sector	ISIN Code	Risk Level
Artemis - US Extended Alpha	North America	GB00BMMV5G59	High risk
Aviva Inv - European Property	Property	GB00B4KZRT07	Medium risk
AXA - Framlington Japan	Japan	GB0003500179	High risk
Baillie Gifford - Global Bond	Global Bonds	GB0031761793	Medium risk
BlackRock - European Absolute Alpha	Targeted Absolute Return	GB00B4Y62T40	Low risk
CF - Miton Defensive Multi Asset	Mixed Investment 0%-35% Shares	GB00B010Y517	Low risk
F&C - Responsible Sterling Bond	Sterling Corporate Bond	GB00B23YHT07	Low risk
Fidelity - Global Dividend	Global Equity Income	GB00B7FQHJ97	High risk
Fidelity - Global Enhanced Income	Global Equity Income	GB00BD1NLL62	High risk
Fundsmith - Equity	Global	GB00B4LPDJ14	High risk
Henderson Inst - Overseas Bond	Global Bonds	GB0007673055	Medium risk
IFSL - Tilney Bestinvest Defensive Portfolio	Mixed Investment 20%-60% Shares	GB00B39VH700	Low risk
Investec - Global Franchise	Global	GB00B7WN9P32	High risk
Jupiter - Absolute Return	Targeted Absolute Return	GB00B5129B32	Medium risk
L&G - Global Technology Index	Technology & Telecom	GB00B0CNH163	High risk
L&G - UK Property	Property	GB00BK35DS04	Low risk
Legg Mason - IF Japan Equity	Japan	GB0033507467	High risk
Liontrust - European Growth	Europe Excluding UK	GB00B1GKBD09	Medium risk
Liontrust - UK Smaller Companies	UK Smaller Companies	GB0007420788	Medium risk
M&G - Emerging Markets Bond	Global Emerging Market Bond	GB0031958738	Medium risk
Man GLG - Continental European Growth	Europe Excluding UK	GB00B0119370	High risk
Premier - ConBrio Sanford Deland UK Buffettology	UK All Companies	GB00B3QQFJ66	High risk
Royal London - Sustainable Managed Growth Trust	Mixed Investment 0%-35% Shares	GB00B6YBY313	Low risk
Standard Life Investments - AAA Income	Sterling Corporate Bond	GB0006161516	Low risk
Standard Life Investments - Emerging Market Debt	Global Emerging Market Bond	GB00B8K56P77	Medium risk
Standard Life Investments - Global Real Estate	Property	GB00B0LD3V96	Medium risk
Threadneedle - Global Bond	Global Bonds	GB0001533685	Medium risk
Threadneedle - UK Social Bond	Sterling Corporate Bond	GB00BF233790	Low risk
Vanguard - LifeStrategy 20% Equity	Mixed Investment 0%-35% Shares	GB00B4NXY349	Low risk

February's Best of the Best Selection - (grouped by risk)

Here is February's shortlist grouped by their risk category (funds unchanged from last month are in black while new additions are in green):

Fund	Sector	ISIN Code	Risk Level
L&G - UK Property	Property	GB00BK35DS04	Low risk
BlackRock - European Absolute Alpha	Targeted Absolute Return	GB00B4Y62T40	Low risk
Threadneedle - UK Social Bond	Sterling Corporate Bond	GB00BF233790	Low risk
Vanguard - LifeStrategy 20% Equity	Mixed Investment 0%-35% Shares	GB00B4NXY349	Low risk
Standard Life Investments - AAA Income	Sterling Corporate Bond	GB0006161516	Low risk
F&C - Responsible Sterling Bond	Sterling Corporate Bond	GB00B23YHT07	Low risk
Royal London - Sustainable Managed Growth Trust	Mixed Investment 0%-35% Shares	GB00B6YBY313	Low risk
IFSL - Tilney Bestinvest Defensive Portfolio	Mixed Investment 20%-60% Shares	GB00B39VH700	Low risk
CF - Miton Defensive Multi Asset	Mixed Investment 0%-35% Shares	GB00B010Y517	Low risk
Henderson Inst - Overseas Bond	Global Bonds	GB0007673055	Medium risk
Threadneedle - Global Bond	Global Bonds	GB0001533685	Medium risk
Baillie Gifford - Global Bond	Global Bonds	GB0031761793	Medium risk
Jupiter - Absolute Return	Targeted Absolute Return	GB00B5129B32	Medium risk
Standard Life Investments - Global Real Estate	Property	GB00B0LD3V96	Medium risk
Liontrust - UK Smaller Companies	UK Smaller Companies	GB0007420788	Medium risk
M&G - Emerging Markets Bond	Global Emerging Market Bond	GB0031958738	Medium risk
Standard Life Investments - Emerging Market Debt	Global Emerging Market Bond	GB00B8K56P77	Medium risk
Aviva Inv - European Property	Property	GB00B4KZRT07	Medium risk
Liontrust - European Growth	Europe Excluding UK	GB00B1GKBD09	Medium risk
Legg Mason - IF Japan Equity	Japan	GB0033507467	High risk
Man GLG - Continental European Growth	Europe Excluding UK	GB00B0119370	High risk
Fundsmith - Equity	Global	GB00B4LPDJ14	High risk
Fidelity - Global Enhanced Income	Global Equity Income	GB00BD1NLL62	High risk
Investec - Global Franchise	Global	GB00B7WN9P32	High risk
Fidelity - Global Dividend	Global Equity Income	GB00B7FQHJ97	High risk
AXA - Framlington Japan	Japan	GB0003500179	High risk
Artemis - US Extended Alpha	North America	GB00BMMV5G59	High risk
Premier - ConBrio Sanford Deland UK Buffettology	UK All Companies	GB00B3QQFJ66	High risk
L&G - Global Technology Index	Technology & Telecom	GB00B0CNH163	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 Best of the Best list are listed below. Many of them remain in the Best funds by Sector selection:

Name	Sector	ISIN Code	Portfolio
Artemis - Pan-European Absolute Return	Targeted Absolute Return	GB00BMMV4J16	Low risk
Artemis - US Select	North America	GB00BMMV5105	High risk
AXA - Framlington UK Smaller Cos	UK Smaller Companies	GB0030310857	Medium risk
Baillie Gifford - American	North America	GB0006061740	High risk
Henderson - Fixed Interest Monthly Income	Sterling Strategic Bond	GB00B7GSYN71	Low risk
HSBC - Open Global Property	Property	GB00B84L7Q94	Medium risk
Investec - Monthly High Income	Sterling High Yield	GB0031141681	Low risk
Jupiter - European	Europe Excluding UK	GB0006664683	High risk
L&G - Emerging Markets Government Bond (US$) Index	Global Emerging Market Bond	GB00B7MJV331	Medium risk
Natixis - Loomis Sayles U.S. Equity Leaders	North America	GB00B8L3WZ29	High risk
Schroder - Monthly High Income	Sterling High Yield	GB0009505693	Low risk
Standard Life Investments - Global Equity Unconstrained	Global	GB0004483540	High risk
Standard Life Investments - Higher Income	Sterling High Yield	GB0000938844	Low risk
Standard Life Investments - UK Equity Income Unconstrained	UK Equity Income	GB00B1LBSR16	Medium risk

Commentary

The stock market had its worst ever start to a year on record. That is an incredible statistic. At one point the FTSE 100 had fallen by nearly 10% in the first few weeks of January alone. In fact nearly every major stock market around the world entered bear market territory during the month, meaning that they had fallen 20% since their highs of last year. Of course that means that the riskier equity based funds within the 80-20 Investor Best of the Best Selection finished the month down. But there were some stand out performers in the low risk end of January's Best of the Best Selection which paid off. The table below shows the average return over the month of the 80-20 Portfolio vs the market and the average fund manager.

Name	Return %
80-20 portfolio	-1.36
Average cautious managed fund	-1.87
FTSE 100	-2.86
Average managed fund	-2.95

Just like last month, once again the 80-20 Investor Best of the Best Selection outperformed over 90% of professional fund managers running managed portfolios. In a month where apparently everyone was losing money a number of funds in January's Best of the Best Selection made money, some more than 3%, as shown below. What is pleasing is both the Japan fund and Emerging Market Bond fund, which I was nervous about, performed fantastically. Luckily the 80-20 Investor algorithm doesn't have emotional jitters.

Fund	Return %
Henderson Inst - Overseas Bond	5.04
Threadneedle - Global Bond	4.89
L&G - Emerging Markets Government Bond (US$) Index	4.45
Legg Mason - IF Japan Equity	3.19

The move to more defensive assets has continued this month with an increased exposure to property, bonds and cautiously managed funds. Once again the preference for global bonds over UK bonds continues. Overall the asset mix has become much broader and more equally balanced with the lowest direct equity exposure ever for the portfolio (see below). This diversification should hopefully fare well if markets continue to tumble.

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:

Alternatives 16% (3%)
Global Fixed Interest 19% (22%)
North American Equities 14% (19%)
European Equities 12% (15%)
UK Equities 11% (18%)
Property 11% (4%)
Japanese Equities 9% (6%)
UK Corporate Fixed Interest (i.e UK bonds) 8% (6%)
Emerging markets 0% (4%)
Cash 0% (0%)

80-20 Investor's outperformance continues even during the market sell-off

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 balanced managed fund (red line) and the average managed fund with up to 85% equity exposure (blue 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.