80-20 Investor Best of the Best Selection – February 2017 Update

Commentary

16 funds from last month's 30 Best of the Best Selection regained their position in February's shortlist. January pretty much followed where December left off as it was again a very good month for the 80-20 Investor BOTB Selection. It therefore comes as no surprise that so many funds retained their position. Those that didn't were mostly just outside the shortlist and a number remain in the Best Funds by Sector lists. If you assumed someone held all of the funds in the portfolio then the return was 1.32% for January compared to -0.57% for the FTSE 100 and between +0.24% and +0.57% for the average multi asset fund. At the foot of this article you can see how the 80-20 Investor Portfolio has continued to outperform the professional fund managers as well as the market since its launch over two and a half years ago.

It's interesting that this month's update of the BOTB includes one Asian fund. However a number of others just missed out, boosted by a strong January. If you recall last month there was no Asian or emerging market exposure at all. The omission didn't have too much of a negative impact because the smaller companies funds that replaced them also performed well. If Asian equities continue to do well then I expect to see more of them back in the fold soon. If you look at this month's heatmap update you can see that risk (equities) was rewarded in January while perceived safer assets struggled comparatively despite the markets becoming unsettled at the end of the month by Donald Trump's endless executive orders. I was quite pleased to see that the Selection as a whole held up well despite the pound rallying against the dollar during the month (as we got more clarity over Brexit and the dollar weakened) which usually hits any overseas funds that you invest in. Overseas fund holdings in dollars immediately reduce in sterling value terms when the pound strengthens.

The new BOTB's bond holdings are now exclusively UK high yield bond funds that tend to have a lower duration, which has remained favourable in this environment. Elsewhere a number of mixed asset funds have crept back into the low risk end of the BOTB list which is perhaps reflective of the erratic nature of markets where any one asset class is often the victim of a Trump attack. The cash allocation of the BOTB remains at 8% as fund managers seek a low risk alternative to holding bonds. There is also an increased weighting to alternative investment strategies such as absolute return. In terms of direct equity exposure the portfolio is now around 70% which is up on last month.

One final thing to note is that two of the retained funds (BlackRock US Dynamic and Schroder - European Alpha Plus) have dropped from the high risk category to the medium risk category. This is almost certainly a reflection of the historically low level of volatility and narrow trading range US equities have experienced of late compared to other equity markets.

Below I list this month's selection in full with the 16 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.

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)

Name	Sector	ISIN Code	Risk Level
7IM - Unconstrained	Targeted Absolute Return	GB00B75MS619	Low risk
Artemis - Monthly Distribution	Mixed Investment 20%-60% Shares	GB00B6TK3R06	Low risk
Artemis - Strategic Assets	Flexible Investment	GB00B3VDD431	Medium risk
AXA - Global High Income	Sterling High Yield	GB00B0T9V375	Low risk
Baillie Gifford - Japanese	Japan	GB0006011133	High risk
BlackRock - US Dynamic	North America	GB00B87XJQ69	Medium risk
Cavendish - AIM	UK Smaller Companies	GB00B0JX3X39	High risk
Cavendish - Opportunities	UK All Companies	GB0032212283	High risk
Cavendish - Technology	Technology & Telecom	GB00B60SMN24	High risk
CF - Morant Wright Japan	Japan	GB0033010017	High risk
Fidelity - Global High Yield	Sterling High Yield	GB00B7K7SQ18	Low risk
FP - Apollo Multi Asset Cautious	Mixed Investment 20%-60% Shares	GB00B3FPDY55	Low risk
Henderson - Global Technology	Technology & Telecom	GB0007698847	High risk
IFSL - Brooks Macdonald Defensive Capital	Targeted Absolute Return	GB00B61MR835	Low risk
Investec - Cautious Managed	Mixed Investment 20%-60% Shares	GB00B8NZ3M08	Low risk
JOHCM - UK Equity Income	UK Equity Income	GB00B03KR500	Medium risk
Jupiter - UK Smaller Companies	UK Smaller Companies	GB0004911870	High risk
M&G - Global Dividend	Global	GB00B46J9127	Medium risk
M&G - Recovery	UK All Companies	GB00B7759Y38	Medium risk
Man GLG - Japan Core Alpha	Japan	GB00B3F46Y30	High risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
Marlborough - Far East Growth	Asia Pacific Excluding Japan	GB00B0NVCN62	High risk
Old Mutual - Cirilium Moderate	Mixed Investment 40%-85% Shares	GB00B2Q8TP98	Low risk
Premier - Diversified	Mixed Investment 40%-85% Shares	GB00B8BJV423	Low risk
R&M - UK Equity High Alpha	UK All Companies	GB00B3D79W34	Medium risk
Schroder - European Alpha Plus	Europe Excluding UK	GB00B7LDKR32	Medium risk
Schroder - Global Equity Income	Global	GB00B76V7M69	Medium risk
Schroder - Monthly High Income	Sterling High Yield	GB00B83RDY83	Low risk
Wise Investments - TB Wise Investment	Flexible Investment	GB0034272533	Medium 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):

Name	Sector	ISIN Code	Risk Level
7IM - Unconstrained	Targeted Absolute Return	GB00B75MS619	Low risk
Artemis - Monthly Distribution	Mixed Investment 20%-60% Shares	GB00B6TK3R06	Low risk
AXA - Global High Income	Sterling High Yield	GB00B0T9V375	Low risk
Fidelity - Global High Yield	Sterling High Yield	GB00B7K7SQ18	Low risk
FP - Apollo Multi Asset Cautious	Mixed Investment 20%-60% Shares	GB00B3FPDY55	Low risk
IFSL - Brooks Macdonald Defensive Capital	Targeted Absolute Return	GB00B61MR835	Low risk
Investec - Cautious Managed	Mixed Investment 20%-60% Shares	GB00B8NZ3M08	Low risk
Old Mutual - Cirilium Moderate	Mixed Investment 40%-85% Shares	GB00B2Q8TP98	Low risk
Premier - Diversified	Mixed Investment 40%-85% Shares	GB00B8BJV423	Low risk
Schroder - Monthly High Income	Sterling High Yield	GB00B83RDY83	Low risk
Artemis - Strategic Assets	Flexible Investment	GB00B3VDD431	Medium risk
BlackRock - US Dynamic	North America	GB00B87XJQ69	Medium risk
JOHCM - UK Equity Income	UK Equity Income	GB00B03KR500	Medium risk
M&G - Global Dividend	Global	GB00B46J9127	Medium risk
M&G - Recovery	UK All Companies	GB00B7759Y38	Medium risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
R&M - UK Equity High Alpha	UK All Companies	GB00B3D79W34	Medium risk
Schroder - European Alpha Plus	Europe Excluding UK	GB00B7LDKR32	Medium risk
Schroder - Global Equity Income	Global	GB00B76V7M69	Medium risk
Wise Investments - TB Wise Investment	Flexible Investment	GB0034272533	Medium risk
Baillie Gifford - Japanese	Japan	GB0006011133	High risk
Cavendish - AIM	UK Smaller Companies	GB00B0JX3X39	High risk
Cavendish - Opportunities	UK All Companies	GB0032212283	High risk
Cavendish - Technology	Technology & Telecom	GB00B60SMN24	High risk
CF - Morant Wright Japan	Japan	GB0033010017	High risk
Henderson - Global Technology	Technology & Telecom	GB0007698847	High risk
Jupiter - UK Smaller Companies	UK Smaller Companies	GB0004911870	High risk
Man GLG - Japan Core Alpha	Japan	GB00B3F46Y30	High risk
Marlborough - Far East Growth	Asia Pacific Excluding Japan	GB00B0NVCN62	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 - Global Income	Global Equity Income	GB00B5N99561	Medium risk
Artemis - High Income	Sterling Strategic Bond	GB00B2PLJN71	Low risk
AXA - Framlington Managed Income	Sterling Strategic Bond	GB00B6RPX228	Low risk
CF Canlife - Global High Yield Bond	Global Bonds	GB00B9J56009	Low risk
GAM - Global Diversified	Global	GB0002426640	Medium risk
GAM - North American Growth	North America	GB0002423852	High risk
Insight - Inflation Linked Corporate Bond	Sterling Strategic Bond	GB00B8CJGZ73	Low risk
Invesco Perpetual - Global Equity	Global	GB00B8N45Y36	High risk
L&G - Global Technology Index Trust	Technology & Telecom	GB00B0CNH163	High risk
Old Mutual - Cirilium Balanced	Mixed Investment 20%-60% Shares	GB00B2Q8V089	Medium risk
Old Mutual - Cirilium Conservative	Mixed Investment 0%-35% Shares	GB00B4LTHW43	Low risk
TB Saracen - Global Income & Growth	Global Equity Income	GB00B8MG4091	Medium risk
Templeton - Growth	Global	GB00B7K6LK38	High risk
Unicorn - UK Smaller Companies	UK Smaller Companies	GB0031785065	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 12% (19%)
• Alternatives 10% (14%) - mostly absolute return strategies
• UK Corporate Fixed Interest (i.e UK bonds) 2% (3%)
• North American Equities 12% (17%)
• European Equities 9% (11%)
• Japanese Equities 11% (9%)
• Property 0% (0%)
• UK Equities 24% (19%)
• Cash 8% (8%)
• Asian equities 0% (0%)
• Asia Pacific Emerging equities 0% (0%)
• Other international equities 12% (0%) which includes Asian equities

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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