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

Commentary

13 funds from last month's 29 Best of the Best Selection regained their position in January's shortlist. After a disappointing November the Best of the Best (BOTB) Selection bounced back in December and was up 2.62% for the month. To give that wider context, the BOTB finished 2016 up 16.69%, comfortably outperforming the average multi-asset fund by between 3.58% - 6.79%. Obviously I'm very pleased with that. Also, 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 2 years ago.

This month's update to the BOTB has seen the most radical change to its asset mix for some time, completely removing all exposure to emerging markets (particularly China) and Asian equities (excluding Japan). These areas have just recently been a drag on the selection's high risk portion, particularly since Donald Trump won the US election. As I explained fully in my recent update to my £50,000 portfolio the strength of the US dollar after the election was a hammer blow to emerging markets and it mostly didn't matter which emerging market asset you owned. Quite simply if you held any emerging assets their value would have fallen. Interestingly the high risk area of the selection now favours American equities and UK smaller companies. The former is a result of the Trump trade while the latter is due to the UK economy confounding post-Brexit-vote growth expectations. In addition the portfolio now has a number of global equity funds.

Once again the new BOTB's bond holdings remain almost exclusively UK high yield and strategic bond funds, most of which I previously identified (in my article Bond funds for a bond bear market) as having a lower more favourable duration. In fact the low risk portion of the selection has the least number of new funds introduced when compared to the medium and high risk sections of the BOTB. We still see a relatively low number of mixed funds (aka managed funds) as the bond market weakness continues to hinder them. It also helps explain why the cash allocation of the BOTB has risen to 8% as fund managers seek a low risk alternative to holding bonds.

In terms of direct equity exposure the portfolio is now around 60% which is marginally up on last month. Bear in mind that the 'alternatives' listed in the asset mix at the bottom of this article will likely include some exposure to equities but via derivatives etc. Unfortunately the opaque 'alternatives' label is a result of some fund managers' inability to fit their fund holdings into one of the Investment Association's official categories.

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. As usual, 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)

Name	Sector	ISIN Code	Risk Level
Artemis - Global Income	Global Equity Income	GB00B5N99561	Medium risk
Artemis - High Income	Sterling Strategic Bond	GB00B2PLJN71	Low risk
Artemis - Strategic Assets	Flexible Investment	GB00B3VDD431	Medium risk
AXA - Framlington Managed Income	Sterling Strategic Bond	GB00B6RPX228	Low risk
AXA - Global High Income	Sterling High Yield	GB00B0T9V375	Low risk
BlackRock - US Dynamic	North America	GB00B87XJQ69	High risk
Cavendish - AIM	UK Smaller Companies	GB00B0JX3X39	High risk
CF - Morant Wright Japan	Japan	GB0033010017	High risk
CF Canlife - Global High Yield Bond	Global Bonds	GB00B9J56009	Low risk
Fidelity - Global High Yield	Sterling High Yield	GB00B7K7SQ18	Low risk
GAM - Global Diversified	Global	GB0002426640	Medium risk
GAM - North American Growth	North America	GB0002423852	High risk
IFSL - Brooks Macdonald Defensive Capital	Targeted Absolute Return	GB00B61MR835	Low risk
Insight - Inflation Linked Corporate Bond	Sterling Strategic Bond	GB00B8CJGZ73	Low risk
Invesco Perpetual - Global Equity	Global	GB00B8N45Y36	High risk
Investec - Cautious Managed	Mixed Investment 20%-60% Shares	GB00B8NZ3M08	Low risk
JOHCM - UK Equity Income	UK Equity Income	GB00B03KR831	Medium risk
L&G - Global Technology Index Trust	Technology & Telecom	GB00B0CNH163	High risk
Man GLG - Japan Core Alpha	Japan	GB00B3F46Y30	High risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium 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
R&M - UK Equity High Alpha	UK All Companies	GB00B3D79W34	Medium risk
Schroder - European Alpha Plus	Europe Excluding UK	GB00B7LDKR32	High risk
Schroder - Global Equity Income	Global	GB00B76V7M69	Medium risk
Schroder - Monthly High Income	Sterling High Yield	GB00B83RDY83	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
Wise Investments - TB Wise Investment	Flexible Investment	GB0034272533	Medium 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):

Name	Sector	ISIN Code	Risk Level
Artemis - High Income	Sterling Strategic Bond	GB00B2PLJN71	Low risk
AXA - Framlington Managed Income	Sterling Strategic Bond	GB00B6RPX228	Low risk
AXA - Global High Income	Sterling High Yield	GB00B0T9V375	Low risk
CF Canlife - Global High Yield Bond	Global Bonds	GB00B9J56009	Low risk
Fidelity - Global High Yield	Sterling High Yield	GB00B7K7SQ18	Low risk
IFSL - Brooks Macdonald Defensive Capital	Targeted Absolute Return	GB00B61MR835	Low risk
Insight - Inflation Linked Corporate Bond	Sterling Strategic Bond	GB00B8CJGZ73	Low risk
Investec - Cautious Managed	Mixed Investment 20%-60% Shares	GB00B8NZ3M08	Low risk
Old Mutual - Cirilium Conservative	Mixed Investment 0%-35% Shares	GB00B4LTHW43	Low risk
Schroder - Monthly High Income	Sterling High Yield	GB00B83RDY83	Low risk
Artemis - Global Income	Global Equity Income	GB00B5N99561	Medium risk
Artemis - Strategic Assets	Flexible Investment	GB00B3VDD431	Medium risk
GAM - Global Diversified	Global	GB0002426640	Medium risk
JOHCM - UK Equity Income	UK Equity Income	GB00B03KR831	Medium risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
Old Mutual - Cirilium Balanced	Mixed Investment 20%-60% Shares	GB00B2Q8V089	Medium risk
R&M - UK Equity High Alpha	UK All Companies	GB00B3D79W34	Medium risk
Schroder - Global Equity Income	Global	GB00B76V7M69	Medium risk
TB Saracen - Global Income & Growth	Global Equity Income	GB00B8MG4091	Medium risk
Wise Investments - TB Wise Investment	Flexible Investment	GB0034272533	Medium risk
BlackRock - US Dynamic	North America	GB00B87XJQ69	High risk
Cavendish - AIM	UK Smaller Companies	GB00B0JX3X39	High risk
CF - Morant Wright Japan	Japan	GB0033010017	High risk
GAM - North American Growth	North America	GB0002423852	High risk
Invesco Perpetual - Global Equity	Global	GB00B8N45Y36	High risk
L&G - Global Technology Index Trust	Technology & Telecom	GB00B0CNH163	High risk
Man GLG - Japan Core Alpha	Japan	GB00B3F46Y30	High risk
Schroder - European Alpha Plus	Europe Excluding UK	GB00B7LDKR32	High risk
Templeton - Growth	Global	GB00B7K6LK38	High risk
Unicorn - UK Smaller Companies	UK Smaller Companies	GB0031785065	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
7IM - Unconstrained	Targeted Absolute Return	GB00B75MS619	Medium risk
Artemis - Global Emerging Markets	Global Emerging Markets	GB00BW9HL132	High risk
Artemis - Monthly Distribution	Mixed Investment 20%-60% Shares	GB00B6TK3R06	Medium risk
Baillie Gifford - Corporate Bond	Sterling Strategic Bond	GB0005947741	Low risk
Baillie Gifford - Japanese	Japan	GB0006011133	High risk
Fidelity - China Consumer	China/Greater China	GB00B82ZSC67	High risk
Henderson - China Opportunities	China/Greater China	GB0031860934	High risk
Invesco Perpetual - Asian	Asia Pacific Excluding Japan	GB00B8N44Q86	High risk
Jupiter - Income Trust	UK Equity Income	GB0004791389	Medium risk
Jupiter - UK Special Situations	UK All Companies	GB0004777347	Medium risk
Majedie - UK Equity	UK All Companies	GB0033283895	Medium risk
Man GLG - Corporate Bond	Global Bonds	GB00B0118B85	Medium risk
Marlborough - Far East Growth	Asia Pacific Excluding Japan	GB00B0NVCN62	High risk
Rathbone - Strategic Bond	Sterling Strategic Bond	GB00B6ZS1L87	Low risk
Threadneedle - Dollar Bond	Global Bonds	GB00B9BRCL73	Medium risk
Threadneedle - Dynamic Real Return	Targeted Absolute Return	GB00BWWC6P48	Low 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  19% (15%)
• Alternatives/Other 14% (18%) - mostly absolute return strategies
• UK Corporate Fixed Interest (i.e UK bonds) 3% (10%)
• North American Equities 17% (12%)
• European Equities 11% (7%)
• Japanese Equities 9% (8%)
• Property 0% (0%)
• UK Equities 19% (12%)
• Cash 8% (5%)
• Asian equities 0% (4%)
• Asia Pacific Emerging equities 0% (9%)

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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