Commentary
Following on from a strong December performance the BOTB had a fantastic January as you can clearly see from the chart below which shows the BOTB versus the average sector performance of professionally managed mixed-asset funds with varying equity exposures as well as the FTSE 100 (just for context). January was generally considered a tough month for investors as illustrated by the negative returns from the professionally managed benchmarks below but the BOTB bucked that trend.
The biggest drivers of outperformance were holdings with exposure to technology stocks, emerging market equities as well as Asian equities, as shown in the table below. The laggards were European stocks (Baillie Gifford European fell 1.94% in January) as well as bond funds which fell in the face of rising yields and rising inflation expectations.
| Fund | Total return % in Jan 2021 |
| Allianz Total Return Asian Equity | 7.91 |
| Baillie Gifford Positive Change | 7.67 |
| Fidelity China Consumer | 6.76 |
| FSSA Greater China Growth | 5.79 |
| Baillie Gifford Long Term Global Growth Investment | 5.48 |
| Barings Eastern Trust | 5.46 |
| FP Octopus UK Micro Cap Growth | 5.38 |
| Baillie Gifford Pacific | 5.37 |
| Invesco Global Emerging Markets (UK) | 5.05 |
It is no surprise that after such a strong month that 21 funds within the BOTB remain the same from last month. With the dollar still under pressure and the market pricing in a continued global economic rebound, commodities make an appearance via the Barings Global Agriculture fund.
The BOTB's European equity exposure has been significantly reduced, following the sector's underperformance, and there's been a slight drop in the exposure to UK equities in favour of a new direct exposure to US equities. It means that Asian and emerging markets make up the largest equity component of the BOTB's asset mix. Once again we see a mix of value-focused funds and growth funds throughout the selection. The overall equity exposure has dropped slightly from 63% last month to 61% this month.
Gilts are still an absentee within the low-risk portion of the BOTB which remains a mix of strategic bond funds, UK corporate bonds, Mixed Investment 0-35% Shares but now also high yield bonds.
At the foot of this article, you can see how the 80-20 Investor selection continues to outperform the professional fund managers as well as the market since its launch six and a half years ago.
Below I list this month's selection in full with the 21 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 Moderately Cautious | Mixed Investment 0-35% Shares | GB0033953497 | Low risk |
| Allianz Total Return Asian Equity | Asia Pacific Excluding Japan | GB00B1FRQV53 | Medium risk |
| ASI Strategic Bond | Sterling Strategic Bond | GB00BWK27X12 | Low risk |
| Baillie Gifford Long Term Global Growth Investment | Global | GB00BD5Z0Z54 | High risk |
| Baillie Gifford Managed | Mixed Investment 40-85% Shares | GB0006010168 | Medium risk |
| Baillie Gifford Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Barclays Multi-Asset Cautious | Mixed Investment 0-35% Shares | GB00BD93Z723 | Low risk |
| Barings Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | Medium risk |
| Barings Global Agriculture | Specialist | GB00B3B9V927 | High risk |
| Barings Korea Trust | Specialist | GB0000840719 | High risk |
| Close Select Fixed Income | Sterling Strategic Bond | GB00BD6R7Y87 | Low risk |
| Fidelity China Consumer | China/Greater China | GB00B82ZSC67 | Medium risk |
| Fidelity Global High Yield | Sterling High Yield | GB00B7K7SQ18 | Low risk |
| Fidelity Multi Asset Open Defensive | Mixed Investment 0-35% Shares | GB00BC7GXK56 | Low risk |
| FP Octopus UK Micro Cap Growth | UK Smaller Companies | GB00BYQ7HN43 | High risk |
| FSSA Greater China Growth | China/Greater China | GB0033874321 | Medium risk |
| Invesco Global Emerging Markets (UK) | Global Emerging Markets | GB00B3RW7S64 | High risk |
| LF Miton UK Smaller Companies | UK Smaller Companies | GB00B818N094 | High risk |
| LF Miton UK Value Opportunities | UK All Companies | GB00B8KV0M06 | High risk |
| Liontrust Global Alpha | Flexible Investment | GB0031190555 | Medium risk |
| Liontrust Global Smaller Companies | Global | GB00B29MXF68 | High risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | Medium risk |
| Premier Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| Rathbone Ethical Bond Fund | Sterling Corporate Bond | GB0030957137 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Stewart Investors Asia Pacific Sustainability. | Specialist | GB00B0TY6V50 | Medium risk |
| Threadneedle Dynamic Real Return | Targeted Absolute Return | GB00B93TQ868 | Low risk |
| VT Tyndall North American | North America | GB00BYPZY050 | 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 |
| 7IM Moderately Cautious | Mixed Investment 0-35% Shares | GB0033953497 | Low risk |
| ASI Strategic Bond | Sterling Strategic Bond | GB00BWK27X12 | Low risk |
| Barclays Multi-Asset Cautious | Mixed Investment 0-35% Shares | GB00BD93Z723 | Low risk |
| Close Select Fixed Income | Sterling Strategic Bond | GB00BD6R7Y87 | Low risk |
| Fidelity Global High Yield | Sterling High Yield | GB00B7K7SQ18 | Low risk |
| Fidelity Multi Asset Open Defensive | Mixed Investment 0-35% Shares | GB00BC7GXK56 | Low risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| Rathbone Ethical Bond Fund | Sterling Corporate Bond | GB0030957137 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Threadneedle Dynamic Real Return | Targeted Absolute Return | GB00B93TQ868 | Low risk |
| Allianz Total Return Asian Equity | Asia Pacific Excluding Japan | GB00B1FRQV53 | Medium risk |
| Baillie Gifford Managed | Mixed Investment 40-85% Shares | GB0006010168 | Medium risk |
| Barings Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | Medium risk |
| Fidelity China Consumer | China/Greater China | GB00B82ZSC67 | Medium risk |
| FSSA Greater China Growth | China/Greater China | GB0033874321 | Medium risk |
| Liontrust Global Alpha | Flexible Investment | GB0031190555 | Medium risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | Medium risk |
| Premier Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| Stewart Investors Asia Pacific Sustainability. | Specialist | GB00B0TY6V50 | Medium risk |
| VT Tyndall North American | North America | GB00BYPZY050 | Medium risk |
| Baillie Gifford Long Term Global Growth Investment | Global | GB00BD5Z0Z54 | High risk |
| Baillie Gifford Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Barings Global Agriculture | Specialist | GB00B3B9V927 | High risk |
| Barings Korea Trust | Specialist | GB0000840719 | High risk |
| FP Octopus UK Micro Cap Growth | UK Smaller Companies | GB00BYQ7HN43 | High risk |
| Invesco Global Emerging Markets (UK) | Global Emerging Markets | GB00B3RW7S64 | High risk |
| LF Miton UK Smaller Companies | UK Smaller Companies | GB00B818N094 | High risk |
| LF Miton UK Value Opportunities | UK All Companies | GB00B8KV0M06 | High risk |
| Liontrust Global Smaller Companies | Global | GB00B29MXF68 | 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:
| Name | Sector | ISIN Code | Risk |
| Baillie Gifford European | Europe Excluding UK | GB0006058258 | Medium risk |
| Baillie Gifford Global Stewardship | Global | GB00BYNK7G95 | High risk |
| BNY Mellon Real Return | Targeted Absolute Return | GB0001642635 | Low risk |
| Fidelity UK Smaller Companies | UK Smaller Companies | GB00B7VNMB18 | High risk |
| LF Miton Defensive Multi Asset | Mixed Investment 0-35% Shares | GB00B0525B66 | Low risk |
| Royal London Corporate Bond | Sterling Corporate Bond | GB00B87FJ401 | Low risk |
| Royal London Sustainable Managed Growth Trust | Mixed Investment 0-35% Shares | GB00B8H7XS88 | Low risk |
| T. Rowe Price Global Focused Growth Equity | Global | GB00BD446774 | Medium risk |
| VT Gravis Clean Energy Income | Global | GB00BFN4H792 | 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 17% (14%)
- Alternatives 12% (13%) - includes absolute return strategies & some bond exposure
- UK Corporate Fixed Interest (i.e UK bonds) 5% (7%)
- Emerging Market Fixed Income 0% (0%)
- North American Equities 14% (11%)
- European Equities 3% (8%)
- Chinese Equities 7% (7%)
- Japanese Equities 0% (0%)
- Property 0% (0%)
- UK Equities 15% (20%)
- Gilts 0% (0%)
- Cash 4% (3%)
- Emerging market equities 4% (3%)
- Other international equities 0% (0%)
- Asian Equities 15% (14%)
- Commodities and Energy 4% (0%)
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 a FTSE 100 tracker fund (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 40-60% 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 outperformed the average managed fund and the market.
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