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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