80-20 Investor Best of the Best Selection – March 2019 Update

Commentary

If you’ve read March's newsletter you will be well aware February was a decent month for equity indices, as central banks helped push stocks higher at the same time as fundamentals collapsed. However, UK investors' returns were hampered by a strengthening pound in the face of Brexit optimism. For all the huffing and puffing during February equity markets still remain in something of a holding pattern, waiting to either finally break higher or capitulate.

Unsurprisingly little has changed within the BOTB this month. 17 funds from last month's list of 25 remain the same, as does the BOTB's overall equity exposure. The 80-20 Investor algorithm considers momentum going back even further than just the start of the year. As such with the market still in a holding pattern we need to see momentum build from here if the market is to push higher. If it does this will then inevitably be reflected in the BOTB, through its asset mix and equity exposure. Right now it still remains fairly cautious.

Given the consistencies between the new BOTB and last month’s BOTB it's not surprising that there is still no Japanese or European equity exposure. However, there is a reduced exposure to property. The exposure to the latter is almost exclusively via shares in property companies, particularly in the US. Emerging markets exposure has again increased slightly this month both in terms of equities and bonds.

From last month's selection the best performers were M&G Global Listed Infrastructure, Seneca Diversified Growth, First State Global Listed Infrastructure and Seneca Diversified Income which made between 1.3% and 2.13% over the course of the month. The stragglers included some of the global property funds (which perhaps explains the reduced property exposure this month) with the Schroder Global Cities Real Estate Income fund falling 1.89%.

The BOTB now has 26 funds (up from 25 last month) which still reflects the attractiveness of cash but that continues to dim. With the volatility in markets still elevated it remains prudent to keep an eye on the weekly updates of the BFBS tables given that the BOTB is updated once a month.

At the foot of this article you can see how the 80-20 Investor selection has outperformed the professional fund managers as well as the market since its launch four and a half years ago.

Below I list this month's selection in full with the 17 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
Aberdeen Emerging Markets Bond	Global Emerging Markets Bond	GB00B5L9HN22	Medium risk
AXA Sterling Index Linked Bond	UK Index Linked Gilts	GB00B02Y6B22	Medium risk
Baillie Gifford Emerging Markets Bond	Global Emerging Markets Bond	GB00B39RMQ20	Medium risk
BlackRock Emerging Markets	Global Emerging Markets	GB00B4R9F681	High risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
First State Diversified Growth	Flexible Investment	GB00BVXC2S15	Medium risk
First State Emerging Markets Bond	Global Emerging Markets Bond	GB00B6R3H571	Low risk
First State Global Listed Infrastructure	Global	GB00B24HJL45	Medium risk
FP Henderson Rowe FTSE RAFI Emerging Markets	Global Emerging Markets	GB00B4TW6408	High risk
HSBC Global Property	Property Other	GB00B28PP161	Medium risk
Janus Henderson Fixed Interest Monthly Income	Sterling Strategic Bond	GB0001920486	Low risk
JPM Emerging Markets Income	Global Emerging Markets	GB00B56DF680	High risk
L&G Emerging Markets Government Bond (US$) Index	Global Emerging Markets Bond	GB00B7MJV331	Low risk
L&G Multi-Asset Target Return	Targeted Absolute Return	GB00BD97XY71	Medium risk
LF Seneca Diversified Growth	Mixed Investment 40-85% Shares	GB00B7FPW579	Medium risk
LF Seneca Diversified Income	Mixed Investment 20-60% Shares	GB00B7JTF560	Low risk
M&G Global Listed Infrastructure	Global	GB00BF00R928	Medium risk
Merian Global Strategic Bond	Global Bonds	GB00B1XG8G39	Low risk
Premier Global Infrastructure Income	Global Equity Income	GB0031637738	High risk
Royal London Index Linked	UK Index Linked Gilts	GB00B8DDWW71	Medium risk
Royal London International Government Bond	Global Bonds	GB00B45XHL18	Low risk
Standard Life Investments Global Real Estate	Property Other	GB00B774LD38	Low risk
Standard Life Investments Global REIT	Property Other	GB00B7MR5W47	High risk
Threadneedle Emerging Market Bond	Global Emerging Markets Bond	GB00B817DW83	Low risk
TIME Investments Commercial Freehold	UK Direct Property	GB00BLRZPX27	Low risk
Vanguard Global Emerging Markets	Global Emerging Markets	GB00BZ82ZY13	High 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
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
First State Emerging Markets Bond	Global Emerging Markets Bond	GB00B6R3H571	Low risk
Janus Henderson Fixed Interest Monthly Income	Sterling Strategic Bond	GB0001920486	Low risk
L&G Emerging Markets Government Bond (US$) Index	Global Emerging Markets Bond	GB00B7MJV331	Low risk
LF Seneca Diversified Income	Mixed Investment 20-60% Shares	GB00B7JTF560	Low risk
Merian Global Strategic Bond	Global Bonds	GB00B1XG8G39	Low risk
Royal London International Government Bond	Global Bonds	GB00B45XHL18	Low risk
Standard Life Investments Global Real Estate	Property Other	GB00B774LD38	Low risk
Threadneedle Emerging Market Bond	Global Emerging Markets Bond	GB00B817DW83	Low risk
TIME Investments Commercial Freehold	UK Direct Property	GB00BLRZPX27	Low risk
Aberdeen Emerging Markets Bond	Global Emerging Markets Bond	GB00B5L9HN22	Medium risk
AXA Sterling Index Linked Bond	UK Index Linked Gilts	GB00B02Y6B22	Medium risk
Baillie Gifford Emerging Markets Bond	Global Emerging Markets Bond	GB00B39RMQ20	Medium risk
First State Diversified Growth	Flexible Investment	GB00BVXC2S15	Medium risk
First State Global Listed Infrastructure	Global	GB00B24HJL45	Medium risk
HSBC Global Property	Property Other	GB00B28PP161	Medium risk
L&G Multi-Asset Target Return	Targeted Absolute Return	GB00BD97XY71	Medium risk
LF Seneca Diversified Growth	Mixed Investment 40-85% Shares	GB00B7FPW579	Medium risk
M&G Global Listed Infrastructure	Global	GB00BF00R928	Medium risk
Royal London Index Linked	UK Index Linked Gilts	GB00B8DDWW71	Medium risk
BlackRock Emerging Markets	Global Emerging Markets	GB00B4R9F681	High risk
FP Henderson Rowe FTSE RAFI Emerging Markets	Global Emerging Markets	GB00B4TW6408	High risk
JPM Emerging Markets Income	Global Emerging Markets	GB00B56DF680	High risk
Premier Global Infrastructure Income	Global Equity Income	GB0031637738	High risk
Standard Life Investments Global REIT	Property Other	GB00B7MR5W47	High risk
Vanguard Global Emerging Markets	Global Emerging Markets	GB00BZ82ZY13	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
Fidelity Global Enhanced Income	Global Equity Income	GB00BD1NLJ41	Medium risk
Fidelity Global Property	Property Other	GB00B7K2NZ09	High risk
Invesco Asian Equity Income (UK)	Asia Pacific Excluding Japan	GB00B4JR4R48	High risk
Newton Asian Income	Asia Pacific Excluding Japan	GB00B0MY6Z69	Medium risk
Newton International Bond	Global Bonds	GB0006779655	Low risk
Royal London UK Government Bond	UK Gilts	GB00B881TW52	Low risk
Santander Sterling Government Bond	UK Gilts	GB00BSTLRD18	Low risk
Schroder Global Cities Real Estate Income	Property Other	GB00B50MLC91	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 9% (16%)
• Alternatives 19% (14%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 0% (0%)
• Emerging Market Fixed Interest 16% (7%)
• North American Equities 6% (6%)*
• European Equities 0% (0%)
• Japanese Equities 0% (0%)
• Property 15% (26%)*
• UK Equities 5% (4%)
• Gilts 8% (7%)
• Cash 4% (4%)
• Asia Pacific Emerging equities 15% (12%)
• Other international equities 3% (0%)
• Asian Equities 0% (4%)

*of the property exposure only around 6% is in direct property, the rest is invested in equities of property companies (such as REITs) around the globe. As such they are actually equities and around half of this is based in the US. Therefore the BOTB has an overall US equity exposure of around 14-17% taking this into account.

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 a FTSE 100 tracker fund (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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