Commentary
16 funds from last month's 30 Best of the Best (BOTB) Selection regained their position in this month's shortlist. Most of those that didn't regain their place in this month's BOTB list remain in their respective Best Funds by Sector (BFBS) lists. As mentioned in July's monthly newsletter, June was a poor month for equity returns. Of the 30 key unit trust sectors only 6 made a positive return. Technology stocks saw some profit taking during June as concerns over the sustainability of the tech rally emerged. It's therefore not surprising that technology funds have dropped out of the BOTB this month with Asian and Chinese equities taking up the baton. These two sectors were among the 6 aforementioned positive sectors from last month.
Chinese equites are an interesting proposition and I look at them in more detail in my recent article - Should China finally be a staple part of an investor’s portfolio? Chinese equities are not for the faint-hearted but if you are fortunate enough to time your entry and exit it will likely set your returns apart from other DIY and professional investors.
The BOTB asset mix is even more diversified than usual. The medium risk portion of the selection, in particular, is dominated by globally diversified funds and flexible managed funds, meaning that the funds invest in a range of asset types. Global funds continue to be preferred over direct US equity funds. Meanwhile the BOTB's direct UK equity exposure is now more mixed between large cap UK equity funds and UK smaller companies funds. It is interesting to see Schroder UK Dynamic Smaller Companies make a reappearance but with a medium risk profile as opposed to the high risk profile we've been used to seeing. This is simply a reflection of the fund's recent performance and stability versus its peer group.
Japanese equities are again an omission while emerging markets are included. In terms of direct equity exposure the portfolio's exposure is slightly up on last month and sits at around 70%. 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 almost three 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.
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)
| Name | Sector | ISIN Code | Risk Level |
| Aberdeen - Emerging Markets Bond | Global Emerging Markets Bond | GB00B5L9HN22 | Medium risk |
| Baillie Gifford - American | North America | GB0006061963 | High risk |
| Baillie Gifford - Emerging Markets Growth | Global Emerging Markets | GB0006020647 | High risk |
| Baillie Gifford - European | Europe Excluding UK | GB0006058258 | High risk |
| Baillie Gifford - Global Income Growth | Global Equity Income | GB0005772586 | Medium risk |
| Baillie Gifford - Greater China | China/Greater China | GB00B39RMM81 | High risk |
| Baillie Gifford - Managed | Mixed Investment 40-85% Shares | GB0006010168 | Medium risk |
| Baillie Gifford - Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Barclays - High Income Portfolio | Mixed Investment 0-35% Shares | GB00B68F5S16 | Low risk |
| Barclays - Income Plus Portfolio | Mixed Investment 0-35% Shares | GB00B6WYG696 | Low risk |
| Consistent - Practical Investment | Mixed Investment 40-85% Shares | GB0006982671 | Low risk |
| F&C - Property Growth and Income | Property | GB00BQWJ8687 | Low risk |
| Fidelity - China Consumer | China/Greater China | GB00B82ZSC67 | High risk |
| Fundsmith - Equity | Global | GB00B4Q5X527 | Medium risk |
| Henderson - Fixed Interest Monthly Income | Sterling Strategic Bond | GB0001920486 | Low risk |
| JPM - Asia | Asia Pacific Excluding Japan | GB0030879695 | High risk |
| Jupiter - Fund of Investment Trusts | Global | GB0004795034 | Medium risk |
| M&G - Fund of Investment Trust Shares | Global | GB0031288680 | Medium risk |
| Man GLG - Strategic Bond | Sterling Strategic Bond | GB00B731HR48 | Low risk |
| Man GLG - UK Income | UK Equity Income | GB00B0117B11 | Medium risk |
| Marlborough - European Multi-Cap | Europe Excluding UK | GB0001719730 | High risk |
| Old Mutual - UK Smaller Companies | UK Smaller Companies | GB00B1XG8B83 | High risk |
| S&W - Saltus Wealth | Targeted Absolute Return | GB00B6RLZP73 | Low risk |
| Schroder - High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Schroder - UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Schroder - UK Dynamic Smaller Companies | UK Smaller Companies | GB0007220360 | Medium risk |
| T. Bailey - Dynamic | Mixed Investment 20-60% Shares | GB00B1385S07 | Low risk |
| Unicorn - Mastertrust | Flexible Investment | GB0031269367 | Medium risk |
| Wise Investments - TB Wise Income | Flexible Investment | GB00B0LJ0160 | Medium risk |
| Wise Investments - TB Wise Investment | Flexible Investment | GB0034272533 | 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):
| Name | Sector | ISIN Code | Risk Level |
| Barclays - High Income Portfolio | Mixed Investment 0-35% Shares | GB00B68F5S16 | Low risk |
| Barclays - Income Plus Portfolio | Mixed Investment 0-35% Shares | GB00B6WYG696 | Low risk |
| Consistent - Practical Investment | Mixed Investment 40-85% Shares | GB0006982671 | Low risk |
| F&C - Property Growth and Income | Property | GB00BQWJ8687 | Low risk |
| Henderson - Fixed Interest Monthly Income | Sterling Strategic Bond | GB0001920486 | Low risk |
| Man GLG - Strategic Bond | Sterling Strategic Bond | GB00B731HR48 | Low risk |
| S&W - Saltus Wealth | Targeted Absolute Return | GB00B6RLZP73 | Low risk |
| Schroder - High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Schroder - UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| T. Bailey - Dynamic | Mixed Investment 20-60% Shares | GB00B1385S07 | Low risk |
| Aberdeen - Emerging Markets Bond | Global Emerging Markets Bond | GB00B5L9HN22 | Medium risk |
| Baillie Gifford - Global Income Growth | Global Equity Income | GB0005772586 | Medium risk |
| Baillie Gifford - Managed | Mixed Investment 40-85% Shares | GB0006010168 | Medium risk |
| Fundsmith - Equity | Global | GB00B4Q5X527 | Medium risk |
| Jupiter - Fund of Investment Trusts | Global | GB0004795034 | Medium risk |
| M&G - Fund of Investment Trust Shares | Global | GB0031288680 | Medium risk |
| Man GLG - UK Income | UK Equity Income | GB00B0117B11 | Medium risk |
| Schroder - UK Dynamic Smaller Companies | UK Smaller Companies | GB0007220360 | Medium risk |
| Unicorn - Mastertrust | Flexible Investment | GB0031269367 | Medium risk |
| Wise Investments - TB Wise Income | Flexible Investment | GB00B0LJ0160 | Medium risk |
| Wise Investments - TB Wise Investment | Flexible Investment | GB0034272533 | Medium risk |
| Baillie Gifford - American | North America | GB0006061963 | High risk |
| Baillie Gifford - Emerging Markets Growth | Global Emerging Markets | GB0006020647 | High risk |
| Baillie Gifford - European | Europe Excluding UK | GB0006058258 | High risk |
| Baillie Gifford - Greater China | China/Greater China | GB00B39RMM81 | High risk |
| Baillie Gifford - Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Fidelity - China Consumer | China/Greater China | GB00B82ZSC67 | High risk |
| JPM - Asia | Asia Pacific Excluding Japan | GB0030879695 | High risk |
| Marlborough - European Multi-Cap | Europe Excluding UK | GB0001719730 | High risk |
| Old Mutual - UK Smaller Companies | UK Smaller Companies | GB00B1XG8B83 | 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 |
| Artemis - European Opportunities | Europe Excluding UK | GB00B6WFCR53 | High risk |
| Artemis - High Income | Sterling Strategic Bond | GB00B2PLJN71 | Low risk |
| AXA - Framlington Global Technology | Technology & Telecommunication | GB00B4W52V57 | High risk |
| AXA - Framlington Managed Income | Sterling Strategic Bond | GB00B6RPX228 | Low risk |
| Baillie Gifford - Corporate Bond | Sterling Strategic Bond | GB0005947741 | Low risk |
| Baillie Gifford - Emerging Markets Leading Companies | Global Emerging Markets | GB00B06HZN29 | High risk |
| FP - Octopus UK Micro Cap Growth | UK Smaller Companies | GB00BYQ7HN43 | High risk |
| Henderson - European Absolute Return | Targeted Absolute Return | GB00B3CPX151 | Low risk |
| Henderson - Global Technology | Technology & Telecommunication | GB0007698847 | High risk |
| L&G - High Income Trust | Sterling High Yield | GB00B0CNHJ41 | Low risk |
| Legg Mason - IF ClearBridge Global Equity Income | Global Equity Income | GB00B2R8FL62 | Medium risk |
| MI - Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | High risk |
| Standard Life Investments - Global Smaller Companies | Global | GB00B7KVX245 | Medium risk |
| TM - Cavendish Technology | Technology & Telecommunication | GB00B60SMN24 | High 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 14% (13%)
- Alternatives 17% (17%) - includes absolute return strategies & property
- UK Corporate Fixed Interest (i.e UK bonds) 0% (3%)
- Emerging Market Fixed Interest 3% (0%)
- North American Equities 8% (15%)
- European Equities 9% (13%)
- Japanese Equities 0% (0%)
- Property 0% (0%)
- UK Equities 23% (17%)
- Cash 5% (5%)
- Asian equities 7% (3%)
- Asia Pacific Emerging equities 9% (7%)
- Other international equities 5% (7%)
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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