Commentary
December was a strong month for equity markets as the Santa rally got into full swing in the UK and the US after the risks surrounding the UK general election and the US-China trade war dissipated. This followed hot on the heels of an already strong November.
December's BOTB had some stand out performances as shown in the table below with the Fidelity UK Smaller Companies fund (a fund that also made the recent Winter Fund Portfolio) making an eye-watering 8.2%.
| Fund | Performance 3rd Dec 2019 to 2nd Jan 2020 |
| Fidelity UK Smaller Companies | 8.2% |
| ASI UK Real Estate Share | 6.66% |
| Fidelity Enhanced Income | 5.81% |
| Close FTSE techMARK | 5.23% |
| Baillie Gifford Positive Change | 5.16% |
In fact during the period only three funds within December's BOTB did not make a profit (all of which invested in Japanese equities), while the remaining funds made an average return of 3.15%, which is quite incredible.
It's, therefore, unsurprising that 16 of the funds from December's BOTB retain their position in January's BOTB.
January's BOTB maintains its reduced unhedged US equity exposure despite US equities hitting new all-time highs in dollar terms. Again, this is reflective of a wider trend of reducing the BOTB's currency exposure across its overseas holdings, while at the same time increasing the BOTB's domestic equity exposure. In fact the UK equity exposure has increased considerably to 25% of assets and most of that is via smaller companies funds. This is reflective of the strong performance in the lead-up to and after the general election.
Other than that the asset mix of the BOTB has remained fairly consistent (the equity content of the BOTB is almost unchanged at 63%), although there is now a small exposure to Asian equities which reflects the improved sentiment surrounding global trade and economic growth.
At the foot of this article you can see how the 80-20 Investor selection has outperformed the professional fund managers as well as the market since its launch over five years ago.
Below I list this month's selection in full with the 16 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 |
| Artemis UK Smaller Companies | UK Smaller Companies | GB00B2PLJL57 | High risk |
| ASI European Real Estate Share | Property Other | GB00BWK26907 | High risk |
| ASI UK Real Estate Share | Property Other | GB00B0XWNN66 | High risk |
| Baillie Gifford Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Barings Strategic Bond | Global Bonds | GB0000831759 | Medium risk |
| Close FTSE techMARK | Technology & Telecommunications | GB00B87JKQ15 | High risk |
| Fidelity Moneybuilder Balanced | Mixed Investment 40-85% Shares | GB00B7XJFX07 | Low risk |
| First State Japan Focus | Japan | GB00BWNGX432 | High risk |
| Invesco High Yield (UK) | Sterling High Yield | GB00B3RW7649 | Low risk |
| JPM UK Smaller Companies | UK Smaller Companies | GB0030880255 | High risk |
| Jupiter Japan Income | Japan | GB00B0HZTZ55 | Medium risk |
| Kames Ethical Cautious Managed | Mixed Investment 20-60% Shares | GB00B1N9DX45 | Low risk |
| Liontrust European Enhanced Income | Europe Excluding UK | GB00BD2WZ873 | Medium risk |
| Liontrust Sustainable Future Corporate Bond | Sterling Corporate Bond | GB0030029069 | Low risk |
| Margetts Sentinel Income Portfolio | Mixed Investment 20-60% Shares | GB00BZ0P5485 | Low risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| MI Downing Monthly Income | UK Equity Income | GB00B61JRG28 | Medium risk |
| Premier Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| Premier Diversified Income | Mixed Investment 20-60% Shares | GB00BYPDV863 | Low risk |
| Royal London Sustainable Diversified Trust | Mixed Investment 20-60% Shares | GB00B844WJ68 | Low risk |
| Sarasin Global Dividend (Sterling Hedged) | Global Equity Income | GB00BGDF8439 | Medium risk |
| Sarasin Global Equity Real Return | Flexible Investment | GB00B7W4B053 | Medium risk |
| Sarasin Responsible Global Equity (Sterling Hedged) | Global | GB00B816B655 | Medium risk |
| Sarasin Thematic Global Equity (Sterling Hedged) | Global | GB00B83F3755 | High risk |
| Schroder Global Healthcare | Global | GB00B76V7Q08 | High risk |
| Schroder Sterling Corporate Bond | Sterling Corporate Bond | GB0009379370 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Slater Growth | UK All Companies | GB00B0706C66 | Medium risk |
| VT Gravis Clean Energy Income | Global | GB00BFN4H792 | 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 |
| Fidelity Moneybuilder Balanced | Mixed Investment 40-85% Shares | GB00B7XJFX07 | Low risk |
| Invesco High Yield (UK) | Sterling High Yield | GB00B3RW7649 | Low risk |
| Kames Ethical Cautious Managed | Mixed Investment 20-60% Shares | GB00B1N9DX45 | Low risk |
| Liontrust Sustainable Future Corporate Bond | Sterling Corporate Bond | GB0030029069 | Low risk |
| Margetts Sentinel Income Portfolio | Mixed Investment 20-60% Shares | GB00BZ0P5485 | Low risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| Premier Diversified Income | Mixed Investment 20-60% Shares | GB00BYPDV863 | Low risk |
| Royal London Sustainable Diversified Trust | Mixed Investment 20-60% Shares | GB00B844WJ68 | Low risk |
| Schroder Sterling Corporate Bond | Sterling Corporate Bond | GB0009379370 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Barings Strategic Bond | Global Bonds | GB0000831759 | Medium risk |
| Jupiter Japan Income | Japan | GB00B0HZTZ55 | Medium risk |
| Liontrust European Enhanced Income | Europe Excluding UK | GB00BD2WZ873 | Medium risk |
| MI Downing Monthly Income | UK Equity Income | GB00B61JRG28 | Medium risk |
| Premier Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| Sarasin Global Dividend (Sterling Hedged) | Global Equity Income | GB00BGDF8439 | Medium risk |
| Sarasin Global Equity Real Return | Flexible Investment | GB00B7W4B053 | Medium risk |
| Sarasin Responsible Global Equity (Sterling Hedged) | Global | GB00B816B655 | Medium risk |
| Slater Growth | UK All Companies | GB00B0706C66 | Medium risk |
| VT Gravis Clean Energy Income | Global | GB00BFN4H792 | Medium risk |
| Artemis UK Smaller Companies | UK Smaller Companies | GB00B2PLJL57 | High risk |
| ASI European Real Estate Share | Property Other | GB00BWK26907 | High risk |
| ASI UK Real Estate Share | Property Other | GB00B0XWNN66 | High risk |
| Baillie Gifford Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Close FTSE techMARK | Technology & Telecommunications | GB00B87JKQ15 | High risk |
| First State Japan Focus | Japan | GB00BWNGX432 | High risk |
| JPM UK Smaller Companies | UK Smaller Companies | GB0030880255 | High risk |
| Sarasin Thematic Global Equity (Sterling Hedged) | Global | GB00B83F3755 | High risk |
| Schroder Global Healthcare | Global | GB00B76V7Q08 | 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 |
| ASI Corporate Bond | Sterling Corporate Bond | GB00BWK26G71 | Low risk |
| ASI Japanese Equity | Japan | GB0004521737 | Medium risk |
| Barclays Europe (ex-UK) Alpha | Europe Excluding UK | GB00B72WQ825 | High risk |
| BlackRock Continental European | Europe Excluding UK | GB00B4VY9893 | High risk |
| BNY Mellon Global Absolute Return | Targeted Absolute Return | GB00B86R4N19 | Low risk |
| Fidelity Enhanced Income | UK Equity Income | GB00B87HPZ94 | Medium risk |
| Fidelity UK Smaller Companies | UK Smaller Companies | GB00B7VNMB18 | High risk |
| First State Diversified Growth | Flexible Investment | GB00BVXC2S15 | Medium risk |
| Marlborough US Multi-Cap Income | North America | GB0001722882 | High risk |
| Merian Corporate Bond | Sterling Corporate Bond | GB00B1XG7X39 | Low risk |
| Royal London Sustainable Leaders Trust | UK All Companies | GB00B7V23Z99 | Medium risk |
| Royal London Sustainable Managed Growth Trust | Mixed Investment 0-35% Shares | GB00B8H7XS88 | Low risk |
| Royal London Sustainable World Trust | Mixed Investment 40-85% Shares | GB00B882H241 | Medium risk |
| Thesis Climate Assets | Mixed Investment 40-85% Shares | GB00B3K3HX15 | 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 17% (17%)
- Alternatives 11% (10%) - includes absolute return strategies & some bond exposure
- UK Corporate Fixed Interest (i.e UK bonds) 4% (7%)
- Emerging Market Fixed Income 0% (0%)
- North American Equities 6% (7%)
- European Equities 9% (11%)
- Japanese Equities 7% (11%)
- Property 7% (4%)
- UK Equities 25% (19%)
- Gilts 0% (0%)
- Cash 5% (4%)
- Emerging market equities 0% (0%)
- Other international equities 3% (6%)
- Asian Equities 3% (0%)
- Commodities and Energy 3% (4%)
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 a FTSE 100 tracker fund (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.
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