Commentary
February 2018 will be remembered as the month when volatility finally returned to equity markets, as discussed in this month's newsletter. Despite this, the BOTB and my £50k portfolio fared comparatively well, down 1.70% and 1.48% respectively after markets rebounded from the initial sell-off. This compares to -1.65% from the average managed fund from the Mixed Investment 40-85% Shares sector and -3.40% for the FTSE 100.
If you look at the latest heatmap you can see that during February investment risk wasn't rewarded with strong returns. Somewhat unusually, but understandably, cash was one of the best performing sectors during the month. The 'cash is King' scenario was reflective of the sudden positive correlation between bonds and equities. Usually, when equities fall bonds tend to rise as investors seek haven assets. If you look at the sectors represented in this month's BOTB, and also the asset mix at the foot of this article, you will see that bond funds are conspicuous in their general absence. In their place creep a number of mixed-asset funds but also property funds that favour investing in actual commercial property rather than just shares of property companies. These types of property funds fell out of favour in the immediate aftermath of the Brexit vote due to concerns that Brexit would impact the commercial property market. Many had either writedowns or suspended withdrawals. While the sector has recovered as a whole it is worth bearing this in mind.
In March's BOTB there are 12 funds that have regained their position, which is perhaps a reflection of the upheaval in investment markets during February. Of those funds that are new many are familiar from past months' BOTB selections while many of the funds that lost their place in March's BOTB remain in their respective BFBS shortlists. Despite the equity market correction emanating from America, the US stock market has proved surprisingly resilient and now is the largest constituent of the BOTB. The rebound was driven mostly by the tech sector so it's no surprise that two technology funds have made it into the high-risk portion of this month's BOTB. It is make or break time for the technology sector as discussed in this month's newsletter.
It is notable that there is no exposure to European equities in this month's BOTB (after they returned last month). While as a collective European stocks managed to avoid a correction the German Dax, in particular, has not enjoyed any of the subsequent global rebound in equity markets.
A mixture of renewed Brexit angst and a weak dollar has had an undue influence on overseas fund returns so currency-hedged funds, especially those investing in Japan, have disappeared from the BOTB. In terms of direct equity exposure the BOTB's exposure remains as it was last month, at around 67%. 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.
March'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 |
| 7IM US Equity Value | North America | GB00BWBSHX88 | Medium risk |
| Aberdeen Diversified Core Growth | Mixed Investment 20-60% Shares | GB00BVTW3820 | Low risk |
| Artemis US Select | North America | GB00BMMV5105 | Medium risk |
| AXA Framlington American Growth | North America | GB00B5LXGG05 | Medium risk |
| AXA Framlington Global Technology | Technology & Telecommunication | GB00B4W52V57 | High risk |
| Baillie Gifford Global Discovery | Global | GB0006059330 | Medium risk |
| Baring Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | High risk |
| CFP SDL UK Buffettology | UK All Companies | GB00B3QQFJ66 | Medium risk |
| FP Apollo Multi Asset Balanced | Mixed Investment 20-60% Shares | GB00B3FPF276 | Low risk |
| FP Apollo Multi Asset Cautious | Mixed Investment 20-60% Shares | GB00B3FPDY55 | Low risk |
| FP Pictet Multi Asset Portfolio | Targeted Absolute Return | GB00BVYTTC41 | Low risk |
| Franklin UK Smaller Companies | UK Smaller Companies | GB00B7FFF708 | High risk |
| Janus Henderson China Opportunities | China/Greater China | GB0031860934 | High risk |
| Janus Henderson Global Technology | Technology & Telecommunication | GB0007698847 | High risk |
| JPM Global Macro Balanced | Mixed Investment 0-35% Shares | GB00B09RGK38 | Low risk |
| JPM US | North America | GB0030878846 | Medium risk |
| Jupiter Japan Income | Japan | GB00B0HZTZ55 | High risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | High risk |
| L&G High Income Trust | Sterling High Yield | GB00B0CNHJ41 | Low risk |
| L&G UK Property | Property | GB00BK35DV33 | Low risk |
| LF Livingbridge UK Micro Cap | UK Smaller Companies | GB00BV9FYS80 | Medium risk |
| LF Miton UK Smaller Companies | UK Smaller Companies | GB00B818N094 | Medium risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | High risk |
| Neptune Emerging Markets | Global Emerging Markets | GB00B8J6SV12 | High risk |
| Neptune Global Equity | Global | GB00B8DLY478 | Medium risk |
| Premier Diversified | Mixed Investment 40-85% Shares | GB00B8BJV423 | Low risk |
| Sarasin Fund of Funds Global Equity | Flexible Investment | GB00B7YYSB32 | Low risk |
| Schroder Global Equity Income | Global Equity Income | GB00B76V7M69 | Medium risk |
| Standard Life Investments Japanese Equity Growth | Japan | GB00B76C7M93 | High risk |
| Standard Life Investments UK Real Estate | Property | GB00BYPHP536 | Low risk |
March's Best of the Best Selection - (grouped by risk)
Here is March'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 Diversified Core Growth | Mixed Investment 20-60% Shares | GB00BVTW3820 | Low risk |
| FP Apollo Multi Asset Balanced | Mixed Investment 20-60% Shares | GB00B3FPF276 | Low risk |
| FP Apollo Multi Asset Cautious | Mixed Investment 20-60% Shares | GB00B3FPDY55 | Low risk |
| FP Pictet Multi Asset Portfolio | Targeted Absolute Return | GB00BVYTTC41 | Low risk |
| JPM Global Macro Balanced | Mixed Investment 0-35% Shares | GB00B09RGK38 | Low risk |
| L&G High Income Trust | Sterling High Yield | GB00B0CNHJ41 | Low risk |
| L&G UK Property | Property | GB00BK35DV33 | Low risk |
| Premier Diversified | Mixed Investment 40-85% Shares | GB00B8BJV423 | Low risk |
| Sarasin Fund of Funds Global Equity | Flexible Investment | GB00B7YYSB32 | Low risk |
| Standard Life Investments UK Real Estate | Property | GB00BYPHP536 | Low risk |
| 7IM US Equity Value | North America | GB00BWBSHX88 | Medium risk |
| Artemis US Select | North America | GB00BMMV5105 | Medium risk |
| AXA Framlington American Growth | North America | GB00B5LXGG05 | Medium risk |
| Baillie Gifford Global Discovery | Global | GB0006059330 | Medium risk |
| CFP SDL UK Buffettology | UK All Companies | GB00B3QQFJ66 | Medium risk |
| JPM US | North America | GB0030878846 | Medium risk |
| LF Livingbridge UK Micro Cap | UK Smaller Companies | GB00BV9FYS80 | Medium risk |
| LF Miton UK Smaller Companies | UK Smaller Companies | GB00B818N094 | Medium risk |
| Neptune Global Equity | Global | GB00B8DLY478 | Medium risk |
| Schroder Global Equity Income | Global Equity Income | GB00B76V7M69 | Medium risk |
| AXA Framlington Global Technology | Technology & Telecommunication | GB00B4W52V57 | High risk |
| Baring Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | High risk |
| Franklin UK Smaller Companies | UK Smaller Companies | GB00B7FFF708 | High risk |
| Janus Henderson China Opportunities | China/Greater China | GB0031860934 | High risk |
| Janus Henderson Global Technology | Technology & Telecommunication | GB0007698847 | High risk |
| Jupiter Japan Income | Japan | GB00B0HZTZ55 | High risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | High risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | High risk |
| Neptune Emerging Markets | Global Emerging Markets | GB00B8J6SV12 | High risk |
| Standard Life Investments Japanese Equity Growth | Japan | GB00B76C7M93 | 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 Growth | Europe Excluding UK | GB00B2PLJD73 | Medium risk |
| AXA Framlington Japan | Japan | GB00BRJZVR88 | High risk |
| Baillie Gifford American | North America | GB0006061963 | Medium risk |
| Baillie Gifford UK Equity Alpha | UK All Companies | GB0005858195 | Medium risk |
| Barclays Adventurous Growth Portfolio | Flexible Investment | GB00B6ZSRL05 | Low risk |
| Barclays Balanced Portfolio | Mixed Investment 20-60% Shares | GB00B6T5CT00 | Low risk |
| Barclays High Income Portfolio | Mixed Investment 20-60% Shares | GB00B68F5S16 | Low risk |
| F&C Property Growth and Income | Property | GB00BQWJ8687 | Low risk |
| Fidelity China Consumer | China/Greater China | GB00B82ZSC67 | High risk |
| JOHCM UK Equity Income | UK Equity Income | GB00B03KR500 | Medium risk |
| JPM Asia Growth | Asia Pacific Excluding Japan | GB0030879695 | High risk |
| Jupiter China | China/Greater China | GB00B1DTDX49 | High risk |
| LF Miton European Opportunities | Europe Excluding UK | GB00BZ2K2M84 | Medium risk |
| Man GLG UK Income | UK Equity Income | GB00B0117B11 | Medium risk |
| Neptune Japan Opportunities | Japan | GB00B3Z0Y815 | Medium risk |
| Sarasin Global Dividend (Sterling Hedged) | Global Equity Income | GB00BGDF8439 | Medium risk |
| UBS Global Emerging Markets Equity | Global Emerging Markets | GB00B7L34154 | High risk |
| VT Turcan Connell 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 6% (8%)
- Alternatives 12% (19%) - includes absolute return strategies & property
- UK Corporate Fixed Interest (i.e UK bonds) 0% (0%)
- Emerging Market Fixed Interest 0% (0%)
- North American Equities 24% (11%)
- European Equities 0% (6%)
- Japanese Equities 8% (7%)
- Property 8% (0%)
- UK Equities 20% (17%)
- Cash 7% (6%)
- Asian equities 3% (7%)
- Asia Pacific Emerging equities 7% (13%)
- Other international equities 5% (6%)
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.
All performance figures are net of fund charges. The material in any email, the MoneytotheMasses.com website, associated pages / channels / accounts and any other correspondence are for general information only and do not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation. See full Terms & Conditions, Privacy Policy and Disclaimer.
Neither MoneytotheMasses.com or 80-20 Investor nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Funds invest in shares, bonds, and other financial instruments and are by their nature speculative and can be volatile. You should never invest more than you can safely afford to lose. The value of your investment can go down as well as up so you may get back less than you originally invested. Tax rules can change and benefits depend on individual circumstances.
Information provided by MoneytotheMasses.com or 80-20 Investor is for general information only and not intended to be relied upon by readers in making (or not making) specific investment decisions.
Appropriate independent advice should be obtained before making any such decisions. Leadenhall Learning (owner of MoneytotheMasses.com or 80-20 Investor) and its staff do not accept liability for any loss suffered by readers as a result of any such decisions.
The tables and graphs are derived from data supplied by Trustnet. All rights Reserved.
