A total of 7 funds from June's Best of the Best Selection make it into July's selection. Below I list this month's selection in full with the 7 funds that regained their place in green while the new additions are in black.
For the first time I have included the full list sorted by both alphabetical name and then by risk category. This is following a request to do so from an 80-20 Investor member. Remember if you have any feedback or development requests for 80-20 Investor please let us know so that we can look to act upon them, as I have here.
But before I start, here is an investing lesson born out of my analysis of over 2,200 funds.
During June when the Greek debt crisis escalated, clearly fund managers were unprepared as 96% of them lost money. Also the worst thing you could have done was to buy a gold fund such as BlackRock Gold & General (down over 10%).
Gold is often cited as a safe haven asset to buy when a crisis hits markets. Gold is a volatile asset in itself and seldom behaves as people claim it should in a crisis. Yet funds like BlackRock Gold & General actually invest in the shares of gold mining companies so are even more volatile and actually high risk. Don't fall into the trap of a) rushing to buy gold and b) thinking that a gold fund always invests in physical gold.
July's Best of the Best Selection - (A-Z by fund name)
(funds unchanged from last month are in green while new additions are in black)
| Name | Sector | ISIN Code | Risk |
| 7IM - Moderately Cautious | Mixed Investment 0%-35% Shares | GB0033953497 | Low risk |
| Aberdeen - European High Yield Bond | Sterling High Yield | GB00B77QLR32 | Low risk |
| Aberdeen - High Yield Bond | Sterling High Yield | GB00B5968F40 | Low risk |
| Aberdeen - Property Trust | Property | GB00B036Z329 | Low risk |
| Argonaut - FP Argonaut European Enhanced Income | Europe Excluding UK | GB00B7M3XX95 | Medium risk |
| BlackRock - Asia Special Situations | Asia Pacific Excluding Japan | GB00BJGZYG57 | High risk |
| BlackRock - Continental European | Europe Excluding UK | GB0005804728 | High risk |
| CF - Miton UK Value Opportunities | UK All Companies | GB00B8KV0M06 | Medium risk |
| CF - Seneca Diversified Income | Mixed Investment 20%-60% Shares | GB0031467961 | Low risk |
| Franklin - UK Smaller Companies | UK Smaller Companies | GB00B7FFF708 | High risk |
| GLG - Continental Europe | Europe Excluding UK | GB00B0119370 | High risk |
| Henderson - Japan Opportunities | Japan | GB0007683203 | Medium risk |
| Invesco Perpetual - Hong Kong & China | China/Greater China | GB0033028332 | High risk |
| Jupiter - Japan Income | Japan | GB00B0HZTZ55 | Medium risk |
| M&G - Short Dated Corporate Bond | Sterling Corporate Bond | GB0031110397 | Low risk |
| Neptune - UK Mid Cap | UK All Companies | GB00B3D7FD61 | Medium risk |
| Old Mutual - Bond 1 | Sterling Strategic Bond | GB0033476184 | Low risk |
| PFS - Chelverton UK Equity Income | UK Equity Income | GB00B1FD6244 | Medium risk |
| PFS - TwentyFour Dynamic Bond | Sterling Strategic Bond | GB00B566LX69 | Low risk |
| Premier - Multi-Asset Distribution | Mixed Investment 20%-60% Shares | GB0031107799 | Low risk |
| Schroder - European Alpha Plus | Europe Excluding UK | GB0033302877 | High risk |
| Schroder - Monthly High Income | Sterling High Yield | GB0009505693 | Low risk |
| Scottish Widows - UK Smaller Companies | UK Smaller Companies | GB0031644197 | High risk |
| Threadneedle - UK Mid 250 | UK All Companies | GB0033547604 | Medium risk |
| Unicorn - UK Income | UK Equity Income | GB00B00Z1S94 | Medium risk |
July's Best of the Best Selection - (grouped by risk)
Here is July's shortlist grouped by their risk category (funds unchanged from last month are in green while new additions are in black):
| Name | Sector | ISIN Code | Risk |
| 7IM - Moderately Cautious | Mixed Investment 0%-35% Shares | GB0033953497 | Low risk |
| Aberdeen - European High Yield Bond | Sterling High Yield | GB00B77QLR32 | Low risk |
| Aberdeen - High Yield Bond | Sterling High Yield | GB00B5968F40 | Low risk |
| Aberdeen - Property Trust | Property | GB00B036Z329 | Low risk |
| CF - Seneca Diversified Income | Mixed Investment 20%-60% Shares | GB0031467961 | Low risk |
| M&G - Short Dated Corporate Bond | Sterling Corporate Bond | GB0031110397 | Low risk |
| Old Mutual - Bond 1 | Sterling Strategic Bond | GB0033476184 | Low risk |
| PFS - TwentyFour Dynamic Bond | Sterling Strategic Bond | GB00B566LX69 | Low risk |
| Premier - Multi-Asset Distribution | Mixed Investment 20%-60% Shares | GB0031107799 | Low risk |
| Schroder - Monthly High Income | Sterling High Yield | GB0009505693 | Low risk |
| Argonaut - FP Argonaut European Enhanced Income | Europe Excluding UK | GB00B7M3XX95 | Medium risk |
| CF - Miton UK Value Opportunities | UK All Companies | GB00B8KV0M06 | Medium risk |
| Henderson - Japan Opportunities | Japan | GB0007683203 | Medium risk |
| Jupiter - Japan Income | Japan | GB00B0HZTZ55 | Medium risk |
| Neptune - UK Mid Cap | UK All Companies | GB00B3D7FD61 | Medium risk |
| PFS - Chelverton UK Equity Income | UK Equity Income | GB00B1FD6244 | Medium risk |
| Threadneedle - UK Mid 250 | UK All Companies | GB0033547604 | Medium risk |
| Unicorn - UK Income | UK Equity Income | GB00B00Z1S94 | Medium risk |
| BlackRock - Asia Special Situations | Asia Pacific Excluding Japan | GB00BJGZYG57 | High risk |
| BlackRock - Continental European | Europe Excluding UK | GB0005804728 | High risk |
| Franklin - UK Smaller Companies | UK Smaller Companies | GB00B7FFF708 | High risk |
| GLG - Continental Europe | Europe Excluding UK | GB00B0119370 | High risk |
| Invesco Perpetual - Hong Kong & China | China/Greater China | GB0033028332 | High risk |
| Schroder - European Alpha Plus | Europe Excluding UK | GB0033302877 | High risk |
| Scottish Widows - UK Smaller Companies | UK Smaller Companies | GB0031644197 | 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 Best of the Best list are listed below. Many of them remain in the Best funds by Sector selection:
| Name | Sector | ISIN Code |
| 7IM - Unconstrained | Targeted Absolute Return | GB00B75MS619 |
| Aberdeen - European Property Share | Property | GB00B0H5MF69 |
| Aberdeen - UK Smaller Companies Equity | UK Smaller Companies | GB00B07T4636 |
| Artemis - Monthly Distribution | Mixed Investment 20%-60% Shares | GB00B74BQB01 |
| Aviva Inv - European Equity | Europe Excluding UK | GB0032494246 |
| Aviva Inv - High Yield Bond | Sterling High Yield | GB00B3CGJ878 |
| AXA - Sterling Index Linked Bond | UK Index - Linked Gilts | GB00B0LLCP07 |
| First State - Global Property Securities | Property | GB00B1F76L55 |
| GLG - Japan CoreAlpha | Japan | GB00B0119933 |
| Henderson - UK Smaller Companies | UK Smaller Companies | GB0007447286 |
| HSBC - Chinese Equity | China/Greater China | GB0000204395 |
| JPM - Cautious Managed | Mixed Investment 0%-35% Shares | GB00B09RGK38 |
| Jupiter - Distribution | Mixed Investment 0%-35% Shares | GB0031294183 |
| Kames - Ethical Cautious Managed | Mixed Investment 20%-60% Shares | GB00B1N9DX45 |
| L&G - Global Emerging Markets Index | Global Emerging Markets | GB00B4KBDL25 |
| M&G - Japan | Japan | GB0030938475 |
| Old Mutual - Cirilium Conservative | Mixed Investment 0%-35% Shares | GB00B4LTHW43 |
| Old Mutual - UK Mid Cap | UK All Companies | GB00B1XG7999 |
| Threadneedle - China Opportunities | China/Greater China | GB00B1PRW734 |
Commentary
Unsurprisingly, following a month where markets were rocked by an escalation in the Greek debt crisis there have been sweeping changes in the 80-20 Investor Best of the Best Selection. The first thing to note is that China has all but disappeared from the selection which is not surprising given the recent sharp sell-off. Some people may wonder why it is included at all. The 80-20 Investor algorithm is based around a momentum style of investing. Clearly short-term momentum is factored in to the algorithm, hence the reduction in Chinese equity funds, but medium term momentum is also vital. The Best of the Best Selection takes this all into account in order to arrive at a short list. It's by applying this process consistently over the long term that your portfolio will benefit, yet occasionally it may throw up uncomfortable results.
A few weeks ago I published a piece of research titled The funds for a Greek exit in which M&G - Short Dated Corporate Bond featured. This fund has unsurprisingly made it into the Best of the Best Selection this month. Also the same piece of research championed property funds which invest in actual buildings (rather than the shares of property companies). Again it is interesting to see such a fund (Aberdeen Property Trust) make this month's shortlist while property-share focused funds have been axed entirely
There is also a general move towards 'equity Income' funds throughout. Equity income funds tend to invest in companies with a history of strong dividend payments. This tends to mean defensive sectors and companies, such as pharmaceutical and utility companies, which also usually fare better in a market sell-off.
The Asset mix
If you analyse all the holdings across the new Best of the Best Selection it is now split:
- UK Equities 29%
- Global Fixed Interest 14%
- European Equities 15%
- Japanese Equities 8%
- UK Corporate Fixed Interest (i.e UK bonds) 7%
- Asia Pacific Emerging Equities (including China) 4%
- Property (mostly shares) 4%
The remainder is made up of other international equities. Overall the asset mix has marginally increased its UK exposure (via UK smaller companies funds) and cut its Asian & China exposure. Interestingly, despite the current Greek exit risks the exposure to European funds has increased. Perhaps this is not as surprising as it first seems. In the high risk category developed-European markets have fared better than more speculative stock markets, despite the Greek debt crisis being the catalyst for June's market downturn.
80-20 Investor Best of the Best fund performance – since inception August 2014
To make the comparison I have assumed that an investor bought all of the 80-20 Best of the Best funds in equal measure and switched them every month. The chart shows the level of outperformance since we began tracking the 80-20 Investor Best of the Best selection back in August 2014. The 80-20 selection is up 10.45% (green line) versus 6.82% for the average managed fund (red line) and 1.08% for the FTSE 100 (black line).
