Commentary
January was a strong month for the BOTB as a whole with the average return of 1.26% in a month that started strongly but began to be buffeted by the headwinds emanating from the bond market, as discussed in February's monthly newsletter. To give this some context, the average managed fund from the Mixed Investment 40-85% Shares sector barely made 0.16% while the FTSE 100 fell 1.96% as the rally in the pound started to bite.
Despite the bond market weakness seeping into equity markets it is good to see that 15 of last month's BOTB funds remain in this month's BOTB selection. Of those funds that are new many are familiar from past months' BOTB selections. The aforementioned bond weakness and rotation into other assets, including equities, shows in the low-risk portion of this month's BOTB with fewer bond funds and more multi-asset and targeted return funds. Elsewhere the US stock market has fared better than many of its peers during the recent market wobble and this helps explain why the US equity funds are now classed as medium risk rather than high risk. The weak dollar has seen the pound rally which has put pressure on UK equities and there is a slightly lower exposure in this month's BOTB than last month's. Unsurprisingly more generally currency-hedged funds have retained their positions.
European equities have made a reappearance and it will be interesting to see how they fare if the euro continues to strengthen vs the dollar. The weak dollar versus the Japanese yen has hurt Japanese stocks and there is a slightly reduced exposure this month. However, the weak dollar has helped emerging market equities. In terms of direct equity exposure the BOTB's exposure now sits around 67% which is marginally up on last month, perhaps reflective of the rotation out of bonds into equities we've seen at times in the market. 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 more than three years ago.
Below I list this month's selection in full with the 15 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 |
| 7IM US Equity Value | North America | GB00BWBSHX88 | Medium risk |
| Aberdeen Diversified Core Growth | Mixed Investment 20-60% Shares | GB00BVTW3820 | Low risk |
| Artemis European Growth | Europe Excluding UK | GB00B2PLJD73 | Medium risk |
| AXA Framlington Japan | Japan | GB00BRJZVR88 | High risk |
| Baillie Gifford American | North America | GB0006061963 | Medium risk |
| Baillie Gifford UK Equity Alpha | UK All Companies | GB0005858195 | Medium risk |
| Barclays Adventurous Growth Portfolio | Flexible Investment | GB00B6ZSRL05 | Low risk |
| Barclays Balanced Portfolio | Mixed Investment 20-60% Shares | GB00B6T5CT00 | Low risk |
| Barclays High Income Portfolio | Mixed Investment 20-60% Shares | GB00B68F5S16 | Low risk |
| Baring Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | High risk |
| F&C Property Growth and Income | Property | GB00BQWJ8687 | Low risk |
| Fidelity China Consumer | China/Greater China | GB00B82ZSC67 | High 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 |
| FP Pictet Multi Asset Portfolio | Targeted Absolute Return | GB00BVYTTC41 | Low risk |
| Janus Henderson China Opportunities | China/Greater China | GB0031860934 | High risk |
| JOHCM UK Equity Income | UK Equity Income | GB00B03KR500 | Medium risk |
| JPM Asia Growth | Asia Pacific Excluding Japan | GB0030879695 | High risk |
| JPM Global Macro Balanced | Mixed Investment 0-35% Shares | GB00B09RGK38 | Low risk |
| Jupiter China | China/Greater China | GB00B1DTDX49 | High risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | High risk |
| LF Miton European Opportunities | Europe Excluding UK | GB00BZ2K2M84 | Medium risk |
| Man GLG UK Income | UK Equity Income | GB00B0117B11 | Medium risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | High risk |
| Neptune Emerging Markets | Global Emerging Markets | GB00B8J6SV12 | High risk |
| Neptune Global Equity | Global | GB00B8DLY478 | Medium risk |
| Neptune Japan Opportunities | Japan | GB00B3Z0Y815 | Medium risk |
| Sarasin Global Dividend (Sterling Hedged) | Global Equity Income | GB00BGDF8439 | Medium risk |
| UBS Global Emerging Markets Equity | Global Emerging Markets | GB00B7L34154 | High risk |
| VT Turcan Connell Absolute Return Portfolio | Targeted Absolute Return | GB00B4QPB031 | 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):
| Name | Sector | ISIN Code | Risk |
| Aberdeen Diversified Core Growth | Mixed Investment 20-60% Shares | GB00BVTW3820 | Low risk |
| Barclays Adventurous Growth Portfolio | Flexible Investment | GB00B6ZSRL05 | Low risk |
| Barclays Balanced Portfolio | Mixed Investment 20-60% Shares | GB00B6T5CT00 | Low risk |
| Barclays High Income Portfolio | Mixed Investment 20-60% Shares | GB00B68F5S16 | Low risk |
| F&C Property Growth and Income | Property | GB00BQWJ8687 | 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 |
| FP Pictet Multi Asset Portfolio | Targeted Absolute Return | GB00BVYTTC41 | Low risk |
| JPM Global Macro Balanced | Mixed Investment 0-35% Shares | GB00B09RGK38 | Low risk |
| VT Turcan Connell Absolute Return Portfolio | Targeted Absolute Return | GB00B4QPB031 | Low risk |
| 7IM US Equity Value | North America | GB00BWBSHX88 | Medium risk |
| Artemis European Growth | Europe Excluding UK | GB00B2PLJD73 | Medium risk |
| Baillie Gifford American | North America | GB0006061963 | Medium risk |
| Baillie Gifford UK Equity Alpha | UK All Companies | GB0005858195 | Medium risk |
| JOHCM UK Equity Income | UK Equity Income | GB00B03KR500 | Medium risk |
| LF Miton European Opportunities | Europe Excluding UK | GB00BZ2K2M84 | Medium risk |
| Man GLG UK Income | UK Equity Income | GB00B0117B11 | Medium risk |
| Neptune Global Equity | Global | GB00B8DLY478 | Medium risk |
| Neptune Japan Opportunities | Japan | GB00B3Z0Y815 | Medium risk |
| Sarasin Global Dividend (Sterling Hedged) | Global Equity Income | GB00BGDF8439 | Medium risk |
| AXA Framlington Japan | Japan | GB00BRJZVR88 | High risk |
| Baring Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | High risk |
| Fidelity China Consumer | China/Greater China | GB00B82ZSC67 | High risk |
| Janus Henderson China Opportunities | China/Greater China | GB0031860934 | High risk |
| JPM Asia Growth | Asia Pacific Excluding Japan | GB0030879695 | High risk |
| Jupiter China | China/Greater China | GB00B1DTDX49 | High risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | High risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | High risk |
| Neptune Emerging Markets | Global Emerging Markets | GB00B8J6SV12 | High risk |
| UBS Global Emerging Markets Equity | Global Emerging Markets | GB00B7L34154 | 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 |
| Baillie Gifford Japanese | Japan | GB0006011133 | High risk |
| Baillie Gifford Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| BlackRock US Dynamic | North America | GB00B87XJQ69 | Medium risk |
| CFP SDL UK Buffettology | UK All Companies | GB00B3QQFJ66 | Medium risk |
| EdenTree Amity Sterling Bond | Sterling Strategic Bond | GB00B2PF8D20 | Low risk |
| Insight Global Absolute Return | Targeted Absolute Return | GB00B86R4N19 | Low risk |
| JPM US | North America | GB0030878846 | Medium risk |
| L&G High Income Trust | Sterling High Yield | GB00B0CNHJ41 | Low risk |
| MI Chelverton UK Equity Income | UK Equity Income | GB00B1Y9J570 | Medium risk |
| Premier Diversified | Mixed Investment 40-85% Shares | GB00B8BJV423 | Low risk |
| Premier Global Alpha Growth | Global | GB00B6740K61 | Medium risk |
| Schroder High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Standard Life Investments Dynamic Distribution | Mixed Investment 20-60% Shares | GB00B7CMQ047 | Low risk |
| Threadneedle China Opportunities | China/Greater China | GB00B1PRW734 | High risk |
| TM Cavendish AIM | UK Smaller Companies | GB00B0JX3Z52 | 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 8% (12%)
- Alternatives 19% (13%) - includes absolute return strategies & property
- UK Corporate Fixed Interest (i.e UK bonds) 0% (0%)
- Emerging Market Fixed Interest 0% (0%)
- North American Equities 11% (11%)
- European Equities 6% (0%)
- Japanese Equities 7% (11%)
- Property 0% (0%)
- UK Equities 17% (19%)
- Cash 6% (4%)
- Asian equities 7% (9%)
- Asia Pacific Emerging equities 13% (11%)
- Other international equities 6% (10%)
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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