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

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.

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