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

A total of 13 funds from December's 29 funds make it into January'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.

January'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 Name	Sector	ISIN Code	Risk Level
Artemis - Pan-European Absolute Return	Targeted Absolute Return	GB00BMMV4J16	Low risk
Artemis - US Extended Alpha	North America	GB00BMMV5G59	High 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
BlackRock - European Absolute Alpha	Targeted Absolute Return	GB00B4Y62T40	Low risk
Fidelity - Global Enhanced Income	Global Equity Income	GB00BD1NLL62	High risk
Henderson - Fixed Interest Monthly Income	Sterling Strategic Bond	GB00B7GSYN71	Low risk
Henderson Inst - Overseas Bond	Global Bonds	GB0007673055	Medium risk
HSBC - Open Global Property	Property	GB00B84L7Q94	Medium risk
Investec - Global Franchise	Global	GB00B7WN9P32	High 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
L&G - Global Technology Index	Technology & Telecom	GB00B0CNH163	High 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
Man GLG - Continental European Growth	Europe Excluding UK	GB00B0119370	Medium risk
Natixis - Loomis Sayles U.S. Equity Leaders	North America	GB00B8L3WZ29	High risk
Premier - ConBrio Sanford Deland UK Buffettology	UK All Companies	GB00B3QQFJ66	Medium 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
Threadneedle - Global Bond	Global Bonds	GB0001533685	Medium risk
Vanguard - LifeStrategy 20% Equity	Mixed Investment 0%-35% Shares	GB00B4NXY349	Low risk

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

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

Fund Name	Sector	ISIN Code	Risk Level
Artemis - Pan-European Absolute Return	Targeted Absolute Return	GB00BMMV4J16	Low risk
BlackRock - European Absolute Alpha	Targeted Absolute Return	GB00B4Y62T40	Low risk
Henderson - Fixed Interest Monthly Income	Sterling Strategic Bond	GB00B7GSYN71	Low risk
Vanguard - LifeStrategy 20% Equity	Mixed Investment 0%-35% Shares	GB00B4NXY349	Low risk
Schroder - Monthly High Income	Sterling High Yield	GB0009505693	Low risk
Standard Life Investments - Higher Income	Sterling High Yield	GB0000938844	Low risk
Investec - Monthly High Income	Sterling High Yield	GB0031141681	Low risk
Man GLG - Continental European Growth	Europe Excluding UK	GB00B0119370	Medium risk
Premier - ConBrio Sanford Deland UK Buffettology	UK All Companies	GB00B3QQFJ66	Medium risk
Liontrust - UK Smaller Companies	UK Smaller Companies	GB0007420788	Medium risk
Liontrust - European Growth	Europe Excluding UK	GB00B1GKBD09	Medium risk
AXA - Framlington UK Smaller Cos	UK Smaller Companies	GB0030310857	Medium risk
Henderson Inst - Overseas Bond	Global Bonds	GB0007673055	Medium risk
HSBC - Open Global Property	Property	GB00B84L7Q94	Medium risk
L&G - Emerging Markets Government Bond (US$) Index	Global Emerging Market Bond	GB00B7MJV331	Medium risk
Threadneedle - Global Bond	Global Bonds	GB0001533685	Medium risk
Standard Life Investments - UK Equity Income Unconstrained	UK Equity Income	GB00B1LBSR16	Medium risk
Legg Mason - IF Japan Equity	Japan	GB0033507467	High risk
Natixis - Loomis Sayles U.S. Equity Leaders	North America	GB00B8L3WZ29	High risk
Artemis - US Extended Alpha	North America	GB00BMMV5G59	High risk
Baillie Gifford - American	North America	GB0006061740	High risk
Investec - Global Franchise	Global	GB00B7WN9P32	High risk
Jupiter - European	Europe Excluding UK	GB0006664683	High risk
Fidelity - Global Enhanced Income	Global Equity Income	GB00BD1NLL62	High risk
Artemis - US Select	North America	GB00BMMV5105	High risk
Standard Life Investments - Global Equity Unconstrained	Global	GB0004483540	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:

Fund Name	Sector	ISIN Code	Risk Level
Aberdeen - European High Yield Bond	Sterling High Yield	GB00B5968F40	Low risk
Aviva Inv - Asia Pacific Property	Property	GB00B2RJM074	Medium risk
AXA - Framlington Japan	Japan	GB0003500179	High risk
BlackRock - Corporate Bond	Sterling Corporate Bond	GB0005769541	Low risk
CF - Miton UK Multi Cap Income	UK Equity Income	GB00B3SRD718	Medium risk
FP - Miton Undervalued Assets	UK All Companies	GB00B3BSKG91	Medium risk
Fundsmith - Equity	Global	GB00B4LPDJ14	High risk
Invesco Perpetual - Global Bond	Global Bonds	GB0033028662	Medium risk
JPM - Japan	Japan	GB0030879471	High risk
L&G - UK Property	Property	GB00BK35DS04	Low risk
Marlborough - High Yield Fixed Interest	Sterling High Yield	GB00B03TN153	Low risk
MFM - Slater Recovery	UK All Companies	GB0031554248	Medium risk
Rathbone - Global Opportunities	Global	GB0030349095	High risk
Schroder - Strategic Credit	Sterling Strategic Bond	GB00B11DNZ00	Low risk
Threadneedle - American Extended Alpha	North America	GB00B28B7B81	High risk
Threadneedle - UK Smaller Companies	UK Smaller Companies	GB0001530343	Medium risk

Commentary

Last month the 80-20 Investor Best of the Best Selection performed incredibly well during a month when most equity markets lost money. The total return from the FTSE 100 was -2.32%, so much for the Santa Rally. However the 80-20 Investor Best of the Best Selection returned 1.13% meaning that it outperformed 99.1% of professional fund managers running managed portfolios.

Unsurprisingly this January's 80-20 Investor Best of the Best Selection looks to build on this by leaving the asset mix (see below) relatively unchanged, albeit with an increased European equity exposure at the expense of Japanese equities. In addition the selection continues to expand the range of assets it is investing in including, for the first time in months, a tiny exposure to emerging markets. This is a bold call and it will be interesting to see how it plays out.

The preference for global bonds over UK bonds continues, allowing the portfolio to benefit from moves in both bond prices and currencies. Finally, there are a number of index trackers in this month's Best of the Best Selection, which emphasises the fact that the algorithm doesn't discriminate against active funds (which are funds run by a manager) and passive funds (run by computers). The 80-20 Investor algorithm invests in whatever is working and so sidesteps the nonsensical passive vs active fund debate that takes up far too many newspaper column inches.

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:

UK Equities 18% (22%)
North American Equities 19% (21%)
Global Fixed Interest 22% (19%)
Japanese Equities 6% (11%)
European Equities 15% (7%)
Property 4% (7%)
UK Corporate Fixed Interest (i.e UK bonds) 6% (6%)
Emerging markets 4% (0%)
Alternatives 3% (4%)
Cash 0% (3%)

The remainder is made up of other international equities.

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 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 (currently it has an 60-65% exposure to equities). So they provide a good comparison of how fund managers with a similar remit have fared over the same period.