80-20 Investor Best of the Best Selection – January 2018 Update

Commentary

As my introduction to this month’s newsletter suggests it’s a case of ‘as you were’ with many of the trends that were profitable in late 2017 continuing to be so at the start of 2018. Asian, US and UK equities were the big winners in December helping to push the average return of the BOTB to 1.62% for the month, which compares to 1.31% for the average managed fund from the Mixed Investment 40-85% Shares sector. The Santa rally certainly arrived in 2017, helped by Trump’s tax reform success.

Unsurprisingly 17 funds from last month's 30 Best of the Best (BOTB) Selection regained their position in this month's shortlist. Interestingly a number of those that missed out only did so narrowly, such as Jupiter Smaller Companies, but they remain in their respective Best Funds by Sector (BFBS) lists.

Technology stocks also enjoyed a resurgence and a technology fund even just missed out on being included in the high risk section of the BOTB. The overall asset mix of the BOTB remains largely unchanged with still no European equity exposure, despite a recent improvement in fortunes, as the strong euro continues to drag on performance. Japanese equities maintain their presence and have had a strong start to 2018 along with other Asian markets. Emerging market equities, the best performing equity group in 2017, also make a reappearance in the list, another sign of the continued uptrend in equities and risk assets. At the start of December Chinese equities slumped over 8% as concerns surrounding a clampdown by Chinese authorities on credit conditions worried investors. But not only have these losses been erased, Chinese equities have rebounded to new multi-year highs as shown in the chart below:

The recent surge in commodity prices, a result of positive global growth and increased demand from China, helped propel oil and mining stocks that make up a significant part of the FTSE 100. This helped cement UK equities as the largest portion of the BOTB. It's good to see Man GLG UK Income, which I hold in my own portfolio, back in the selection. With the pound continuing to rally (now back above $1.35) the currency hedged Japanese and global funds continue to fare well. It's also worth noting that the F&C Property Growth and Income fund which I held on to within my own portfolio when it dropped out of the 80-20 Investor shortlists has returned to the fold as a low risk alternative to bonds.

There's been a drop in the number of managed multi-asset funds generally in the BOTB, which is perhaps not surprising given the continued strong performance of equities versus other assets. In fact the Flexible Investment sector has dropped completely out of the BOTB and BFBS tables. In terms of direct equity exposure the BOTB's exposure sits around 65%. 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 17 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
7IM US Equity Value	North America	GB00BWBSHX88	High risk
AXA Framlington Japan	Japan	GB00BRJZVR88	High risk
Baillie Gifford Japanese	Japan	GB0006011133	High risk
Baillie Gifford Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
Barclays Balanced Portfolio	Mixed Investment 20-60% Shares	GB00B6T5CT00	Low risk
Baring Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	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
F&C Property Growth and Income	Property	GB00BQWJ8687	Low risk
FP Apollo Multi Asset Balanced	Mixed Investment 20-60% Shares	GB00B3FPF276	Low risk
Insight Global Absolute Return	Targeted Absolute Return	GB00B86R4N19	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
JPM US	North America	GB0030878846	Medium risk
L&G High Income Trust	Sterling High Yield	GB00B0CNHJ41	Low risk
Man GLG UK Income	UK Equity Income	GB00B0117B11	Medium risk
MI Chelverton UK Equity Income	UK Equity Income	GB00B1Y9J570	Medium risk
Neptune Global Equity	Global	GB00B8DLY478	Medium risk
Neptune Japan Opportunities	Japan	GB00B3Z0Y815	Medium risk
Premier Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Low risk
Premier Global Alpha Growth	Global	GB00B6740K61	Medium risk
Sarasin Global Dividend (Sterling Hedged)	Global Equity Income	GB00BGDF8439	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
UBS Global Emerging Markets Equity	Global Emerging Markets	GB00B7L34154	High 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
UBS Global Emerging Markets Equity	Global Emerging Markets	GB00B7L34154	High risk
Barclays Balanced Portfolio	Mixed Investment 20-60% Shares	GB00B6T5CT00	Low risk
EdenTree Amity Sterling Bond	Sterling Strategic Bond	GB00B2PF8D20	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
Insight Global Absolute Return	Targeted Absolute Return	GB00B86R4N19	Low risk
JPM Global Macro Balanced	Mixed Investment 0-35% Shares	GB00B09RGK38	Low risk
L&G High Income Trust	Sterling High Yield	GB00B0CNHJ41	Low risk
Premier Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Low risk
Schroder High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Standard Life Investments Dynamic Distribution	Mixed Investment 20-60% Shares	GB00B7CMQ047	Low risk
BlackRock US Dynamic	North America	GB00B87XJQ69	Medium risk
CFP SDL UK Buffettology	UK All Companies	GB00B3QQFJ66	Medium risk
JOHCM UK Equity Income	UK Equity Income	GB00B03KR500	Medium risk
JPM US	North America	GB0030878846	Medium risk
Man GLG UK Income	UK Equity Income	GB00B0117B11	Medium risk
MI Chelverton UK Equity Income	UK Equity Income	GB00B1Y9J570	Medium risk
Neptune Global Equity	Global	GB00B8DLY478	Medium risk
Neptune Japan Opportunities	Japan	GB00B3Z0Y815	Medium risk
Premier Global Alpha Growth	Global	GB00B6740K61	Medium risk
Sarasin Global Dividend (Sterling Hedged)	Global Equity Income	GB00BGDF8439	Medium risk
7IM US Equity Value	North America	GB00BWBSHX88	High risk
AXA Framlington Japan	Japan	GB00BRJZVR88	High risk
Baillie Gifford Japanese	Japan	GB0006011133	High risk
Baillie Gifford Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
Baring Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	High risk
Janus Henderson China Opportunities	China/Greater China	GB0031860934	High risk
JPM Asia Growth	Asia Pacific Excluding Japan	GB0030879695	High risk
Threadneedle China Opportunities	China/Greater China	GB00B1PRW734	High risk
TM Cavendish AIM	UK Smaller Companies	GB00B0JX3Z52	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 High Yield Bond	Sterling High Yield	GB0030816713	Low risk
CF Livingbridge UK Micro Cap	UK Smaller Companies	GB00BV9FYS80	Medium risk
CF Miton Cautious Multi Asset	Mixed Investment 20-60% Shares	GB00B0W1V856	Low risk
FP Apollo Multi Asset Cautious	Mixed Investment 20-60% Shares	GB00B3FPDY55	Low risk
Jupiter UK Smaller Companies	UK Smaller Companies	GB0004911870	Medium risk
Legg Mason IF Martin Currie Japan Alpha	Japan	GB00BVZ6V950	High risk
Man GLG Strategic Bond	Sterling Strategic Bond	GB00B731HR48	Low risk
Old Mutual Asia Pacific	Asia Pacific Excluding Japan	GB00B1XG8C90	High risk
Slater Recovery	UK All Companies	GB0031554248	Medium risk
Standard Life Investments Global Emerging Markets Equity Income	Global Emerging Markets	GB00B8B02G41	High risk
Standard Life Investments Global Smaller Companies	Global	GB00B7KVX245	Medium risk
T. Bailey Dynamic	Mixed Investment 20-60% Shares	GB00B1385S07	Low risk
Wise Funds Limited TB Wise Multi-Asset Growth	Flexible Investment	GB0034272533	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 12% (13%)
• Alternatives 13% (20%) - 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% (10%)
• European Equities 0% (0%)
• Japanese Equities 11% (11%)
• Property 0% (0%)
• UK Equities 19% (17%)
• Cash 4% (5%)
• Asian equities 9% (9%)
• Asia Pacific Emerging equities 11% (10%)
• Other international equities 10% (5%)

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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