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

Commentary

May saw stocks markets regain their swagger and for UK investors there was the double boost of the plummeting pound helping the FTSE 100 hit new all-time highs while at the same amplifying the returns on their overseas holdings, most notably in the US. Riskier assets once again outperformed lower risk assets (such as bonds) with the strongest returns being experienced in technology stocks, US equities and Chinese equities. From last month's selection, Baillie Gifford Global Discovery produced an astounding 13.53% in May alone! Other stand-out performers include AXA Framlington American Growth (up 6.86%). Both funds are in my own £50,000 portfolio. Down the other end of the spectrum, bond market weakness hampered bond funds and their returns ranged from -0.2% to -2%. Both my portfolio and the BOTB benefited from diversifying their low-risk portion away from bonds and into alternative assets such as property. The BOTB was up by an average of 2.72% in May versus 1.84% for the equivalent average professionally managed fund.

If you look at the latest heatmap you can see this overall trend of higher risk assets being rewarded replicated in May's column. With rising US Treasury yields continuing to spook investors bond funds struggled. The inability of bonds to effectively diversify an equity portfolio at the moment means that the bond exposure of the BOTB remains largely unchanged and still below 20%. In fact this month's selection only has 29 funds in it as there are fewer than normal low-risk opportunities, as identified by the 80-20 Investor algorithm.

US equities have gained a greater exposure in this month's BOTB as the falling pound boosted their returns and the rally in tech shares also buoyed stocks across the pond. Unsurprisingly, there is a higher technology exposure in this month's BOTB, building on last month's success.

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 perhaps a reflection of investors' continued preference for domestically focused stocks in the face of an escalating trade war. Interestingly European equities have finally returned from the cold and now account for around 10% of the BOTB. It will be interesting to see if they can cement their place in light of the political risks that never seem far away in the European Union

In June's BOTB there are 14 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 risen slightly from 56% last month to 62% 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 14 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
Aberdeen European Equity	Europe Excluding UK	GB00B0LG6P37	Medium 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
AXA Framlington American Growth	North America	GB00B5LXGG05	High risk
AXA Framlington Global Technology	Technology & Telecommunication	GB00B4W52V57	High risk
Baillie Gifford Investment Grade Bond	Sterling Corporate Bond	GB0030816481	Low risk
Baillie Gifford Japanese Income Growth	Japan	GB00BYZJQG71	Medium risk
Baillie Gifford Positive Change	Global	GB00BYVGKV59	High risk
F&C Property Growth and Income	Property	GB00BQWJ8687	Low risk
Fidelity Asia	Asia Pacific Excluding Japan	GB00B6Y7NF43	High risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	Medium risk
Jupiter UK Smaller Companies	UK Smaller Companies	GB0004911870	Medium risk
Legg Mason IF Martin Currie North American	North America	GB00BVZ6VD94	High risk
LF Canlife Managed 0%-35%	Mixed Investment 0-35% Shares	GB00BZ005541	Low risk
LF Canlife Portfolio III	Mixed Investment 0-35% Shares	GB00B96T7P76	Low risk
LF Livingbridge UK Micro Cap	UK Smaller Companies	GB00BV9FYS80	Medium risk
LF Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	Medium risk
Liontrust European Growth	Europe Excluding UK	GB00B4ZM1M76	Medium risk
Neptune China	China/Greater China	GB00B5Q38588	High risk
Neptune Global Technology	Technology & Telecommunication	GB00BYXZ5N79	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	UK Equity Income	GB00B3PM1190	High risk
Schroder Income Maximiser	UK Equity Income	GB00B5B0KM51	Medium risk
Schroder Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
Standard Life Investments Global Smaller Companies	Global	GB00B7KVX245	High 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
Allianz Gilt Yield	UK Gilts	GB0031383283	Low risk
Baillie Gifford Investment Grade Bond	Sterling Corporate Bond	GB0030816481	Low risk
F&C Property Growth and Income	Property	GB00BQWJ8687	Low risk
LF Canlife Managed 0%-35%	Mixed Investment 0-35% Shares	GB00BZ005541	Low risk
LF Canlife Portfolio III	Mixed Investment 0-35% Shares	GB00B96T7P76	Low 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 Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
Aberdeen European Equity	Europe Excluding UK	GB00B0LG6P37	Medium risk
Allianz UK Equity Income	UK Equity Income	GB00B82ZGC20	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 Livingbridge UK Micro Cap	UK Smaller Companies	GB00BV9FYS80	Medium risk
LF Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	Medium risk
Liontrust European Growth	Europe Excluding UK	GB00B4ZM1M76	Medium risk
Premier Pan European Property Share	Property	GB00B65PFY02	Medium risk
Schroder Income Maximiser	UK Equity Income	GB00B5B0KM51	Medium risk
Artemis US Select	North America	GB00BMMV5105	High 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
Fidelity Asia	Asia Pacific Excluding Japan	GB00B6Y7NF43	High risk
Legg Mason IF Martin Currie North American	North America	GB00BVZ6VD94	High risk
Neptune China	China/Greater China	GB00B5Q38588	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
Aberdeen Diversified Core Growth	Mixed Investment 20-60% Shares	GB00BVTW3820	Low risk
Baillie Gifford Global Discovery	Global	GB0006059330	Medium risk
Baillie Gifford Japanese	Japan	GB0006011133	High risk
EdenTree Higher Income	Mixed Investment 40-85% Shares	GB0009449710	Medium risk
JOHCM UK Equity Income	UK Equity Income	GB00B03KR500	High risk
JPM Japan	Japan	GB0030879471	High risk
L&G UK Property	Property	GB00BK35DV33	Low risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	Medium risk
McInroy & Wood Smaller Companies	Global	GB00B8NC4D98	Medium risk
MI Chelverton UK Equity Growth	UK All Companies	GB00BP855B75	Medium risk
Premier Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Medium risk
Sarasin Global Dividend (Sterling Hedged)	Global Equity Income	GB00BGDF8439	Medium risk
Schroder High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Schroder Mixed Distribution	Mixed Investment 20-60% Shares	GB00B78ST188	Low risk
Schroder Strategic Bond	Sterling Strategic Bond	GB00B7FPS593	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 9% (8%)
• Alternatives 18% (19%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 6% (5%)
• Emerging Market Fixed Interest 0% (0%)
• North American Equities 19% (14%)
• European Equities 11% (0%)
• Japanese Equities 7% (10%)
• Property 5% (8%)
• UK Equities 19% (22%)
• Cash 0% (4%)
• Asian equities 3% (3%)
• Asia Pacific Emerging equities 3% (5%)
• Other international equities 0% (2%)

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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