80-20 Investor Best of the Best Selection – July 2018 Update

Commentary

As discussed in July's monthly newsletter, June was the month when markets reacted to the mounting trade war threats. Typically in any given month either riskier assets perform strongly or the opposite is true and lower risk assets outperform.

But if you look at the latest heatmap you can see that there was a divergence of returns across assets and risk levels. It was the escalation in the trade war between the US and China (but also Europe) that was the culprit. Assets that are predicted to be the ultimate winners in the trade war such as smaller companies stocks and US equities (most notably tech stocks) rallied. While those deemed to be the ultimate losers in a full-blown trade war (Chinese equities, Asian equities and emerging markets) underperformed. It is therefore not surprising that none of the latter are in this month's BOTB selection or the latest BFBS update. Chinese equities, in particular, had a rough ride in the latter part of June after an initial rally.

Despite the knock to equity markets, bond funds continued their lacklustre form so there is an increased exposure to property in the BOTB selection, as a low-risk alternative. Once again ‘income’ funds have a notable presence which is not surprising as their defensive bias often helps them fare better in a struggling equity market. The BOTB once again contains a number of smaller companies funds which is a reflection of investors' continued preference for domestically focused stocks in the face of an escalating trade war. European equities have remained in the BOTB as does some exposure to Japanese equities. The overriding theme is a move west into more developed equity markets.

In July's BOTB there are 12 funds that have regained their position. Of those funds that are new many are familiar from past months' BOTB selections while many of the funds that lost their place in this month's BOTB remain in their respective BFBS shortlists.

In terms of direct equity exposure, the BOTB's exposure has fallen slightly from 62% last month to 57% this month. 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 more than three years ago.

Below I list this month's selection in full with the 12 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
Aberdeen European Equity	Europe Excluding UK	GB00B0LG6P37	Medium risk
Aberdeen UK Property	Property	GB00BTLX1F24	Low risk
AXA Framlington American Growth	North America	GB00B5LXGG05	High risk
AXA Framlington Global Technology	Technology & Telecommunication	GB00B4W52V57	High risk
Baillie Gifford Japanese Income Growth	Japan	GB00BYZJQG71	Medium risk
Baillie Gifford Positive Change	Global	GB00BYVGKV59	High risk
Baillie Gifford UK Equity Alpha	UK All Companies	GB0005858195	High risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
Fidelity Global Property	Property	GB00B7K2NZ09	High risk
Janus Henderson US Growth	North America	GB0032438466	High risk
JPM Japan	Japan	GB0030879471	High risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	Medium risk
Jupiter UK Smaller Companies	UK Smaller Companies	GB0004911870	Medium risk
LF Canlife Managed 0%-35%	Mixed Investment 0-35% Shares	GB00BZ005541	Low risk
LF Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	Medium risk
Liontrust Sustainable Future Absolute Growth	Flexible Investment	GB0030029622	Medium risk
Neptune Global Technology	Technology & Telecommunication	GB00BYXZ5N79	High risk
Newton International Bond	Global Bonds	GB0006779655	Medium risk
Royal London European Growth Trust	Europe Excluding UK	GB0009537407	Medium risk
Royal London Short Duration Credit	Sterling Strategic Bond	GB00BD050949	Low risk
S&W Saltus Multi Asset Class	Targeted Absolute Return	GB00B43T2834	Low risk
Schroder Global Equity Income	Global Equity Income	GB00B76V7M69	Medium risk
Schroder Income	UK Equity Income	GB00B3PM1190	High risk
Schroder MM Diversity Income	Mixed Investment 20-60% Shares	GB00B4K1MN77	Low risk
Schroder UK Dynamic Absolute Return	Targeted Absolute Return	GB00B3N74T57	Low risk
Standard Life Investments Global Smaller Companies	Global	GB00B7KVX245	High risk
Standard Life Investments UK Gilt	UK Gilts	GB00B6WZXS38	Low risk
Standard Life Investments UK Real Estate	Property	GB00BYPHP536	Low risk
Unicorn Outstanding British Companies	UK All Companies	GB00B1GFWW16	Medium risk
VT Tcam Income Portfolio	Mixed Investment 0-35% Shares	GB00B9L4H242	Low 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
Aberdeen UK Property	Property	GB00BTLX1F24	Low risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
LF Canlife Managed 0%-35%	Mixed Investment 0-35% Shares	GB00BZ005541	Low risk
Royal London Short Duration Credit	Sterling Strategic Bond	GB00BD050949	Low risk
S&W Saltus Multi Asset Class	Targeted Absolute Return	GB00B43T2834	Low risk
Schroder MM Diversity Income	Mixed Investment 20-60% Shares	GB00B4K1MN77	Low risk
Schroder UK Dynamic Absolute Return	Targeted Absolute Return	GB00B3N74T57	Low risk
Standard Life Investments UK Gilt	UK Gilts	GB00B6WZXS38	Low risk
Standard Life Investments UK Real Estate	Property	GB00BYPHP536	Low risk
VT Tcam Income Portfolio	Mixed Investment 0-35% Shares	GB00B9L4H242	Low risk
Aberdeen European Equity	Europe Excluding UK	GB00B0LG6P37	Medium risk
Baillie Gifford Japanese Income Growth	Japan	GB00BYZJQG71	Medium risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	Medium risk
Jupiter UK Smaller Companies	UK Smaller Companies	GB0004911870	Medium risk
LF Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	Medium risk
Liontrust Sustainable Future Absolute Growth	Flexible Investment	GB0030029622	Medium risk
Newton International Bond	Global Bonds	GB0006779655	Medium risk
Royal London European Growth Trust	Europe Excluding UK	GB0009537407	Medium risk
Schroder Global Equity Income	Global Equity Income	GB00B76V7M69	Medium risk
Unicorn Outstanding British Companies	UK All Companies	GB00B1GFWW16	Medium risk
AXA Framlington American Growth	North America	GB00B5LXGG05	High risk
AXA Framlington Global Technology	Technology & Telecommunication	GB00B4W52V57	High risk
Baillie Gifford Positive Change	Global	GB00BYVGKV59	High risk
Baillie Gifford UK Equity Alpha	UK All Companies	GB0005858195	High risk
Fidelity Global Property	Property	GB00B7K2NZ09	High risk
Janus Henderson US Growth	North America	GB0032438466	High risk
JPM Japan	Japan	GB0030879471	High risk
Neptune Global Technology	Technology & Telecommunication	GB00BYXZ5N79	High risk
Schroder Income	UK Equity Income	GB00B3PM1190	High risk
Standard Life Investments Global Smaller Companies	Global	GB00B7KVX245	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
Allianz Gilt Yield	UK Gilts	GB0031383283	Low risk
Allianz UK Equity Income	UK Equity Income	GB00B82ZGC20	Medium risk
Artemis US Select	North America	GB00BMMV5105	High risk
Baillie Gifford Investment Grade Bond	Sterling Corporate Bond	GB0030816481	Low risk
F&C Property Growth and Income	Property	GB00BQWJ8687	Low risk
Fidelity Asia	Asia Pacific Excluding Japan	GB00B6Y7NF43	High risk
Legg Mason IF Martin Currie North American	North America	GB00BVZ6VD94	High risk
LF Canlife Portfolio III	Mixed Investment 0-35% Shares	GB00B96T7P76	Low risk
LF Livingbridge UK Micro Cap	UK Smaller Companies	GB00BV9FYS80	Medium risk
Liontrust European Growth	Europe Excluding UK	GB00B4ZM1M76	Medium risk
Neptune China	China/Greater China	GB00B5Q38588	High risk
Premier Pan European Property Share	Property	GB00B65PFY02	Medium risk
Royal London Ethical Bond	Sterling Strategic Bond	GB00B8K6PK81	Low risk
S&W Saltus Wealth	Targeted Absolute Return	GB00B6RLZP73	Low risk
Schroder European Equity Absolute Return	Targeted Absolute Return	GB00B39VWX15	Low risk
Schroder Income Maximiser	UK Equity Income	GB00B5B0KM51	Medium risk
Schroder Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
VT Tcam Absolute Return Portfolio	Targeted Absolute Return	GB00B4QPB031	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 12% (9%)
• Alternatives 17% (18%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 0% (6%)
• Emerging Market Fixed Interest 0% (0%)
• North American Equities 16% (19%)
• European Equities 12% (11%)
• Japanese Equities 11% (7%)
• Property 10% (5%)
• UK Equities 17% (19%)
• Cash 4% (0%)
• Asian equities 1% (3%)
• Asia Pacific Emerging equities 0% (3%)
• Other international equities 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.

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