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

Commentary

Eleven 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 remain in their respective Best Funds by Sector (BFBS) lists. As mentioned in June's monthly newsletter, May was a great month to be an investor. That's not to say the month didn't pass without incident, the eruption of Trumpgate perhaps the biggest blip. However investors continue to buy-the-dips for now and it drove equity markets to numerous all-time highs.

While some of the funds within the BOTB have changed, the overall asset mix remains broadly the same (see bottom of the article). Global funds have gained favour over direct US equity funds, although the former are still predominantly US focused. The strengthening euro vs sterling as well as diminished political risks in Europe have helped cement a number of European equity funds.  Marlborough European Multi-Cap is a case in point and is the most consistent member of the BOTB in the last year. It is interesting and perhaps unsurprising that European equities have mostly dropped into the medium risk category, while US equities have tended to move in the opposite direction. You can see this on this month's growth heatmap. I expect the latter move reflects the hidden nervousness in US markets I highlighted in my recent market commentary.

The hedged funds that made an appearance in last month's BOTB have fallen out as, with the exception of the euro, sterling's value flatlined against most currencies during the month. It will be interesting to see how currency markets react to the UK general election next week. The BOTB's direct UK equity exposure remains largely via smaller companies funds and the sector had a strong month again during May (see the aforementioned heatmap). Managed funds once again are prevalent which reflects the fact that bond markets haven't collapsed so far this year as many had anticipated. As I said in last month's comments, yes the returns have been largely unexciting but they have been positive and fairly consistent.

Japanese equities remain a notable omission while emerging markets and Chinese equities are included, for the latter it's the first time since January/February. The overall message from this month's BOTB is 'diversification'. If you glance through the list of funds a range of sectors are included as well as a number of diversified funds (global and managed funds). In terms of direct equity exposure the portfolio's exposure is slightly down on last month and sits at around 65%. 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 since its launch almost three years ago.

Below I list this month's selection in full with the 11 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.

June'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
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 - American	North America	GB0006061963	Medium risk
Baillie Gifford - Corporate Bond	Sterling Strategic Bond	GB0005947741	Low risk
Baillie Gifford - Emerging Markets Leading Companies	Global Emerging Markets	GB00B06HZN29	High risk
Baillie Gifford - European	Europe Excluding UK	GB0006058258	Medium 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	Low risk
Baillie Gifford - Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
Barclays - High Income Portfolio	Mixed Investment 0-35% Shares	GB00B68F5S16	Low risk
F&C - Property Growth and Income	Property	GB00BQWJ8687	Low risk
FP - Octopus UK Micro Cap Growth	UK Smaller Companies	GB00BYQ7HN43	High risk
Fundsmith - Equity	Global	GB00B4Q5X527	Medium 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
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
MI - Chelverton UK Equity Growth	UK All Companies	GB00BP855B75	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
Standard Life Investments - Global Smaller Companies	Global	GB00B7KVX245	Medium risk
TM - Cavendish Technology	Technology & Telecommunication	GB00B60SMN24	High 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

June's Best of the Best Selection - (grouped by risk)

Here is June'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
Artemis - High Income	Sterling Strategic Bond	GB00B2PLJN71	Low risk
AXA - Framlington Managed Income	Sterling Strategic Bond	GB00B6RPX228	Low risk
Baillie Gifford - Corporate Bond	Sterling Strategic Bond	GB0005947741	Low risk
Baillie Gifford - Managed	Mixed Investment 40-85% Shares	GB0006010168	Low risk
Barclays - High Income Portfolio	Mixed Investment 0-35% Shares	GB00B68F5S16	Low risk
F&C - Property Growth and Income	Property	GB00BQWJ8687	Low risk
Henderson - European Absolute Return	Targeted Absolute Return	GB00B3CPX151	Low risk
L&G - High Income Trust	Sterling High Yield	GB00B0CNHJ41	Low risk
S&W - Saltus Wealth	Targeted Absolute Return	GB00B6RLZP73	Low risk
Schroder - High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Baillie Gifford - American	North America	GB0006061963	Medium risk
Baillie Gifford - European	Europe Excluding UK	GB0006058258	Medium risk
Baillie Gifford - Global Income Growth	Global Equity Income	GB0005772586	Medium risk
Fundsmith - Equity	Global	GB00B4Q5X527	Medium risk
Legg Mason - IF ClearBridge Global Equity Income	Global Equity Income	GB00B2R8FL62	Medium risk
Marlborough - European Multi-Cap	Europe Excluding UK	GB0001719730	Medium risk
Standard Life Investments - Global Smaller Companies	Global	GB00B7KVX245	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
Artemis - European Opportunities	Europe Excluding UK	GB00B6WFCR53	High risk
AXA - Framlington Global Technology	Technology & Telecommunication	GB00B4W52V57	High risk
Baillie Gifford - Emerging Markets Leading Companies	Global Emerging Markets	GB00B06HZN29	High risk
Baillie Gifford - Greater China	China/Greater China	GB00B39RMM81	High risk
Baillie Gifford - Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
FP - Octopus UK Micro Cap Growth	UK Smaller Companies	GB00BYQ7HN43	High risk
Henderson - Global Technology	Technology & Telecommunication	GB0007698847	High risk
MI - Chelverton UK Equity Growth	UK All Companies	GB00BP855B75	High risk
Old Mutual - UK Smaller Companies	UK Smaller Companies	GB00B1XG8B83	High risk
TM - Cavendish Technology	Technology & Telecommunication	GB00B60SMN24	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 - Pan-European Absolute Return	Targeted Absolute Return	GB00BMMV4J16	Medium risk
AXA - Global High Income	Sterling High Yield	GB00B0T9V375	Low risk
Barclays - Income Plus Portfolio	Mixed Investment 0%-35% Shares	GB00B6WYG696	Low risk
Baring - European Growth	Europe Excluding UK	GB0000804335	Medium risk
BlackRock - Asia Special Situations	Asia Pacific Excluding Japan	GB00BJGZZ065	High risk
BlackRock - US Dynamic	North America	GB00B87XJQ69	Medium risk
Cavendish - Opportunities	UK All Companies	GB0032212283	Medium risk
EdenTree - Amity European	Europe Excluding UK	GB0008448333	High risk
FP - Apollo Multi Asset Cautious	Mixed Investment 20%-60% Shares	GB00B3FPDY55	Low risk
Premier - Diversified	Mixed Investment 40%-85% Shares	GB00B8BJV423	Low risk
Sarasin - Fund of Funds - Global Equity	Flexible Investment	GB00B7YYSB32	Medium risk
Sarasin - Global Higher Dividend (Sterling Hedged)	Global Equity Income	GB00B80S2X69	Medium risk
Sarasin - Thematic Global Equity (Sterling Hedged)	Global	GB00B83F3755	Medium risk
Schroder - UK Dynamic Smaller Companies	UK Smaller Companies	GB0007220360	High risk
Templeton - Global Total Return Bond	Global Bonds	GB00BKT0HX25	Low risk
Threadneedle - UK Smaller Companies	UK Smaller Companies	GB0001530343	High risk
TwentyFour - Dynamic Bond	Sterling Strategic Bond	GB00B5KPRZ34	Low risk
UBS - US Equity	North America	GB00B7V68L26	High risk
Unicorn - UK Smaller Companies	UK Smaller Companies	GB0031785065	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 13% (13%)
• Alternatives 17% (16%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 3% (0%)
• Emerging Market Fixed Interest 0% (0%)
• North American Equities 15% (18%)
• European Equities 13% (12%)
• Japanese Equities 0% (0%)
• Property 0% (0%)
• UK Equities 17% (19%)
• Cash 5% (5%)
• Asian equities 3% (0%)
• Asia Pacific Emerging equities 7% (3%)
• Other international equities 7% (14%)

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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