80-20 Investor Best of the Best Selection – July 2017 Update

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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