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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