80-20 Investor Best of the Best Selection – July 2016 Update

Commentary

As half of this month's 80-20 Investor Best of the Best Selection retained their place from last month's shortlist the portfolio keeps its reduced equity exposure. Global bonds still account for the largest component of the portfolio and although the portfolio has a low direct exposure to equities the 'alternatives' listed will include exposure to equities but via derivatives etc.

The 80-20 Investor portfolio performed spectacularly in the aftermath of the Brexit vote, gaining over 5% in the two days immediately afterwards while the FTSE 100 fell by over 5%. Also, despite the market sell-off no stop loss alerts were triggered on last month's Best of the Best Selection in the volatile week following the Brexit vote. That highlights the robustness of the 80-20 Investor algorithm at selecting funds.

Equity markets have since regained some poise, with most markets recovering their post-Brexit losses. Unsurprisingly the portfolio has not reduced its equity exposure further. In fact funds with direct European and UK equity exposure have crept back in. The key equity theme within the portfolio remains diversification across asset classes and geography. This explains why a number of managed funds from the Mixed sectors are now featured in the portfolio. There is still a strong emphasis on global assets which served last month's portfolio well as they received a boost from the fall in the value of the pound. Interestingly the UK equity exposure remains very low at around 5% while UK Gilts make an appearance, boosted by bouts of market uncertainty and the prospect of further quantitative easing in the UK. What is also interesting is how some bond funds have moved up risk category as their volatility has increased as a result of the recent market turmoil.

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.

A total of 15 funds from June's 29 funds make it into July's selection. Below I list this month's selection in full with the 15 funds that regained their place in black while the new additions are in green.

Just as last time, I have included the full list sorted alphabetically by name and then by risk category.

July'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)

Fund Name	Sector	ISIN Code	Risk Level
AXA - Framlington Japan	Japan	GB00BRJZVR88	High risk
AXA - Sterling Corporate Bond	Sterling Corporate Bond	GB00B0T9V714	Low risk
AXA - Sterling Strategic Bond	Sterling Strategic Bond	GB00B02Y6M37	Medium risk
Barclays - Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Medium risk
BlackRock - Global Property Securities Equity Tracker	Property	GB00B5BFJG71	High risk
CF Canlife - Global Equity Income	Global Equity Income	GB00B5W34S70	Medium risk
CF Canlife - North American	North America	GB00B73N3278	High risk
F&C - Emerging Markets	Global Emerging Markets	GB0005751002	High risk
Fidelity - Asia Pacific Opportunities	Asia Pacific Excluding Japan	GB00BQ1SWL90	High risk
Fidelity - Multi Asset Allocator Defensive	Mixed Investment 0%-35% Shares	GB00B8YQD220	Low risk
First State - Global Listed Infrastructure	Global	GB00B24HJC53	Medium risk
JPM - Emerging Markets Income	Global Emerging Markets	GB00B56DF680	High risk
JPM - Japan	Japan	GB0030879471	High risk
Jupiter - Absolute Return	Targeted Absolute Return	GB00B5129B32	Medium risk
L&G - Mixed Investment 0-35%	Mixed Investment 0%-35% Shares	GB00B8KRCM23	Low risk
L&G - Sterling Corporate Bond Index	Sterling Corporate Bond	GB00B4M01C47	Low risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
McInroy & Wood - Balanced	Mixed Investment 40%-85% Shares	GB00B7RRJ163	Medium risk
McInroy & Wood - Income	Mixed Investment 40%-85% Shares	GB00B8KQRW41	Medium risk
Schroder - Global Real Estate Securities Income	Property	GB00B50MLC91	High risk
Schroder - UK Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
Thesis - Climate Assets	Mixed Investment 40%-85% Shares	GB00B5NB7L44	Medium risk
Threadneedle - Defensive	Mixed Investment 0%-35% Shares	GB0032010042	Low risk
Threadneedle - Dynamic Real Return	Targeted Absolute Return	GB00BWWC6P48	Low risk
Threadneedle - Emerging Market Bond	Global Emerging Market Bond	GB00B817DW83	High risk
Threadneedle - Global Bond	Global Bonds	GB00B8C2M701	Medium risk
Threadneedle - Sterling Bond	UK Gilts	GB00B7SH5738	Medium risk
UBS - Sterling Corporate Bond Indexed	Sterling Corporate Bond	GB00B9973R25	Low risk
Vanguard - LifeStrategy 20% Equity	Mixed Investment 0%-35% Shares	GB00B4NXY349	Low risk
Vanguard - UK Inflation Linked Gilt Index	UK Index - Linked Gilts	GB00B45Q9038	High risk
Wise Investments - Evenlode Income	UK All Companies	GB00B40Y5R17	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 black while new additions are in green):

Fund Name	Sector	ISIN Code	Risk Level
Vanguard - LifeStrategy 20% Equity	Mixed Investment 0%-35% Shares	GB00B4NXY349	Low risk
UBS - Sterling Corporate Bond Indexed	Sterling Corporate Bond	GB00B9973R25	Low risk
L&G - Sterling Corporate Bond Index	Sterling Corporate Bond	GB00B4M01C47	Low risk
Schroder - UK Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
AXA - Sterling Corporate Bond	Sterling Corporate Bond	GB00B0T9V714	Low risk
L&G - Mixed Investment 0-35%	Mixed Investment 0%-35% Shares	GB00B8KRCM23	Low risk
Threadneedle - Defensive	Mixed Investment 0%-35% Shares	GB0032010042	Low risk
Fidelity - Multi Asset Allocator Defensive	Mixed Investment 0%-35% Shares	GB00B8YQD220	Low risk
Threadneedle - Dynamic Real Return	Targeted Absolute Return	GB00BWWC6P48	Low risk
McInroy & Wood - Income	Mixed Investment 40%-85% Shares	GB00B8KQRW41	Medium risk
McInroy & Wood - Balanced	Mixed Investment 40%-85% Shares	GB00B7RRJ163	Medium risk
CF Canlife - Global Equity Income	Global Equity Income	GB00B5W34S70	Medium risk
Threadneedle - Sterling Bond	UK Gilts	GB00B7SH5738	Medium risk
Threadneedle - Global Bond	Global Bonds	GB00B8C2M701	Medium risk
Jupiter - Absolute Return	Targeted Absolute Return	GB00B5129B32	Medium risk
Wise Investments - Evenlode Income	UK All Companies	GB00B40Y5R17	Medium risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
Thesis - Climate Assets	Mixed Investment 40%-85% Shares	GB00B5NB7L44	Medium risk
Barclays - Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Medium risk
AXA - Sterling Strategic Bond	Sterling Strategic Bond	GB00B02Y6M37	Medium risk
First State - Global Listed Infrastructure	Global	GB00B24HJC53	Medium risk
F&C - Emerging Markets	Global Emerging Markets	GB0005751002	High risk
Fidelity - Asia Pacific Opportunities	Asia Pacific Excluding Japan	GB00BQ1SWL90	High risk
JPM - Emerging Markets Income	Global Emerging Markets	GB00B56DF680	High risk
Schroder - Global Real Estate Securities Income	Property	GB00B50MLC91	High risk
Threadneedle - Emerging Market Bond	Global Emerging Market Bond	GB00B817DW83	High risk
JPM - Japan	Japan	GB0030879471	High risk
AXA - Framlington Japan	Japan	GB00BRJZVR88	High risk
CF Canlife - North American	North America	GB00B73N3278	High risk
BlackRock - Global Property Securities Equity Tracker	Property	GB00B5BFJG71	High risk
Vanguard - UK Inflation Linked Gilt Index	UK Index - Linked Gilts	GB00B45Q9038	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:

 

Fund Name	Sector	ISIN Code	Risk Level
CF - Prudential Dynamic Focused 0-30 Portfolio	Mixed Investment 0%-35% Shares	GB00B5BNX690	Low risk
Fidelity - Global Enhanced Income	Global Equity Income	GB00BD1NLL62	Medium risk
Fidelity - Strategic Bond	Sterling Strategic Bond	GB00B469J896	Low risk
Fundsmith - Equity	Global	GB00B4Q5X527	High risk
Invesco Perpetual - Global Targeted Returns	Targeted Absolute Return	GB00B8CHD613	Low risk
Jupiter - UK Smaller Companies	UK Smaller Companies	GB0004911870	Medium risk
L&G - Emerging Markets Government Bond (US$) Index	Global Emerging Market Bond	GB00B7MJV331	Medium risk
L&G - Managed Monthly Income Trust	Sterling Corporate Bond	GB00B0CNHQ18	Low risk
Man GLG - Continental European Growth	Europe Excluding UK	GB00B0119370	Medium risk
Standard Life Investments - AAA Income	Sterling Corporate Bond	GB00B4LQY248	Low risk
Stewart Investors - Worldwide Sustainability	Global	GB00B845Y045	High risk
Threadneedle - European Corporate Bond	Global Bonds	GB00B7MJ0253	Medium risk
Threadneedle - European High Yield Bond	Global Bonds	GB00B6RRFW23	Medium risk
Threadneedle - UK Social Bond	Sterling Corporate Bond	GB00BF233790	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 22% (21%)
• Alternatives/Other  21% (19%)
• UK Corporate Fixed Interest (i.e UK bonds) 11% (12%)
• North American Equities  9% (11%)
• European Equities  7% (11%)
• Japanese Equities 9% (9%)
• Property 7% (7%)
• UK Equities 7% (5%)
• Cash 0% (5%)
• Asian equities 0% (0%)
• UK Gilts  7% (0%)
• Other international equities  0% (0%)
• Emerging markets 0% (0%)

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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