Commentary
As you will have read in March’s newsletter, February 2020 will be talked about for years to come. Markets finally capitulated, with COVID-19 being the catalyst for a long-overdue correction. In such an environment all ships sink at once.
The only funds to make money were those invested in high-quality bonds (such as those issued by governments). Of the 2145 funds available to investors, which invest in a range of assets, 92% of them lost money in February. It’s a pattern reflected in February’s BOTB where only 10% of the funds made a profit. The three funds that did were Vanguard UK Long Duration Gilt Index (up 2.2%), ASI Sterling Bond (up 1.08%) and Schroder Strategic Bond (up 0.07%). At the other end of the spectrum, was Slater Growth which fell over 10%, a by-product of a month where the FTSE 100 fell 9%.
As a whole, the average return of February’s BOTB was -4.80%, which compares to a -4.68% average return by funds in the Mixed Investment 40-85% Shares.
15 of the funds from February’s BOTB retain their place in this month's BOTB. Interestingly there is now a small Asian equity exposure, a reflection of how Chinese equities have in fact just hit a two year high, recovering their COVID-19 losses. There is an increased presence of Property shares (REITS) along with funds with exposure to utilities, both sectors that have outperformed during the recent sell-off. This month’s BOTB has a reduced equity exposure (down to 52%) in favour of bonds (including emerging market bonds), a sign that the brakes are being applied. In terms of equity exposure, the UK and European exposures have reduced in favour of US equities.
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 over five years ago.
Below I list this month's selection in full with the 15 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 |
| ASI European Real Estate Share | Property Other | GB00BWK26907 | Medium risk |
| ASI Strategic Bond | Sterling Strategic Bond | GB00BWK27Z36 | Low risk |
| ASI UK Real Estate Share | Property Other | GB00B0XWNN66 | High risk |
| AXA Framlington Biotech | Specialist | GB0031007254 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Close Select Fixed Income | Sterling Strategic Bond | GB00BD6R7Y87 | Low risk |
| First State Diversified Growth | Flexible Investment | GB00BVXC2S15 | Medium risk |
| First State Emerging Markets Bond | Global EM Bonds - Hard Currency | GB00B6R3H571 | Low risk |
| GAM Credit Opportunities GBP | Sterling Strategic Bond | GB00BYQJ5G92 | Low risk |
| Invesco High Yield (UK) | Sterling High Yield | GB00B3RW7649 | Low risk |
| JPM UK Smaller Companies | UK Smaller Companies | GB0030880255 | High risk |
| Kames Ethical Cautious Managed | Mixed Investment 20-60% Shares | GB00B1N9DX45 | Medium risk |
| LF Canlife Asia Pacific | Asia Pacific Excluding Japan | GB00B719QW87 | High risk |
| LF Gresham House UK Multi Cap Income | UK Equity Income | GB00BYXVGS75 | High risk |
| LF Miton Global Infrastructure Income | Global Equity Income | GB00BD3H9L21 | Medium risk |
| Liontrust Sustainable Future Corporate Bond | Sterling Corporate Bond | GB0030029069 | Low risk |
| Liontrust Sustainable Future Managed | Mixed Investment 40-85% Shares | GB0030030398 | Medium risk |
| Merian Corporate Bond | Sterling Corporate Bond | GB00B1XG7X39 | Low risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| Premier Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| Premier Diversified Income | Mixed Investment 20-60% Shares | GB00BYPDV863 | Medium risk |
| Premier Global Infrastructure Income | Global Equity Income | GB0031637738 | Medium risk |
| Rathbone UK Opportunities Fund | UK All Companies | GB0030430804 | High risk |
| Royal London UK Government Bond | UK Gilts | GB00B881TW52 | Medium risk |
| Sarasin Thematic Global Equity (Sterling Hedged) | Global | GB00B83F3755 | High risk |
| Schroder Sterling Corporate Bond | Sterling Corporate Bond | GB0009379370 | Low risk |
| Schroder Strategic Bond | Sterling Strategic Bond | GB00B7FPS593 | Low risk |
| Threadneedle UK Smaller Companies | UK Smaller Companies | GB0001530343 | High risk |
| Vanguard UK Long Duration Gilt Index | UK Gilts | GB00B4M89245 | High risk |
| VT Gravis Clean Energy Income | Global | GB00BFN4H792 | Medium 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 |
| ASI Strategic Bond | Sterling Strategic Bond | GB00BWK27Z36 | Low risk |
| Close Select Fixed Income | Sterling Strategic Bond | GB00BD6R7Y87 | Low risk |
| First State Emerging Markets Bond | Global EM Bonds - Hard Currency | GB00B6R3H571 | Low risk |
| GAM Credit Opportunities GBP | Sterling Strategic Bond | GB00BYQJ5G92 | Low risk |
| Invesco High Yield (UK) | Sterling High Yield | GB00B3RW7649 | Low risk |
| Liontrust Sustainable Future Corporate Bond | Sterling Corporate Bond | GB0030029069 | Low risk |
| Merian Corporate Bond | Sterling Corporate Bond | GB00B1XG7X39 | Low risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| Schroder Sterling Corporate Bond | Sterling Corporate Bond | GB0009379370 | Low risk |
| Schroder Strategic Bond | Sterling Strategic Bond | GB00B7FPS593 | Low risk |
| ASI European Real Estate Share | Property Other | GB00BWK26907 | Medium risk |
| First State Diversified Growth | Flexible Investment | GB00BVXC2S15 | Medium risk |
| Kames Ethical Cautious Managed | Mixed Investment 20-60% Shares | GB00B1N9DX45 | Medium risk |
| LF Miton Global Infrastructure Income | Global Equity Income | GB00BD3H9L21 | Medium risk |
| Liontrust Sustainable Future Managed | Mixed Investment 40-85% Shares | GB0030030398 | Medium risk |
| Premier Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| Premier Diversified Income | Mixed Investment 20-60% Shares | GB00BYPDV863 | Medium risk |
| Premier Global Infrastructure Income | Global Equity Income | GB0031637738 | Medium risk |
| Royal London UK Government Bond | UK Gilts | GB00B881TW52 | Medium risk |
| VT Gravis Clean Energy Income | Global | GB00BFN4H792 | Medium risk |
| ASI UK Real Estate Share | Property Other | GB00B0XWNN66 | High risk |
| AXA Framlington Biotech | Specialist | GB0031007254 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| JPM UK Smaller Companies | UK Smaller Companies | GB0030880255 | High risk |
| LF Canlife Asia Pacific | Asia Pacific Excluding Japan | GB00B719QW87 | High risk |
| LF Gresham House UK Multi Cap Income | UK Equity Income | GB00BYXVGS75 | High risk |
| Rathbone UK Opportunities Fund | UK All Companies | GB0030430804 | High risk |
| Sarasin Thematic Global Equity (Sterling Hedged) | Global | GB00B83F3755 | High risk |
| Threadneedle UK Smaller Companies | UK Smaller Companies | GB0001530343 | High risk |
| Vanguard UK Long Duration Gilt Index | UK Gilts | GB00B4M89245 | 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 |
| ASI (AAM) UK Smaller Companies | UK Smaller Companies | GB00B07T4859 | High risk |
| ASI Sterling Bond | Global Bonds | GB00BWK27087 | Medium risk |
| AXA Ethical Distribution | Mixed Investment 20-60% Shares | GB0005409262 | Low risk |
| Barings Strategic Bond | Global Bonds | GB0000831759 | Medium risk |
| Close FTSE techMARK | Technology & Telecommunications | GB00B87JKQ15 | High risk |
| Fidelity Moneybuilder Balanced | Mixed Investment 40-85% Shares | GB00B7XJFX07 | Low risk |
| Liontrust European Enhanced Income (Hedged) | Europe Excluding UK | GB00BD2WZ873 | Medium risk |
| M&G Global Listed Infrastructure | Global | GB00BF00R928 | Medium risk |
| Premier Ethical | UK All Companies | GB0004073002 | High risk |
| Royal London Sustainable Diversified Trust | Mixed Investment 20-60% Shares | GB00B844WJ68 | Low risk |
| Sarasin Global Dividend (Sterling Hedged) | Global Equity Income | GB00BGDF8439 | Medium risk |
| Sarasin Global Equity Real Return | Flexible Investment | GB00B7W4B053 | Medium risk |
| Sarasin Responsible Global Equity (Sterling Hedged) | Global | GB00B816B655 | Medium risk |
| Slater Growth | UK All Companies | GB00B0706C66 | Medium risk |
| UBS S&P 500 Index | North America | GB00BMN91T34 | 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 16% (14%)
- Alternatives 12% (12%) - includes absolute return strategies & some bond exposure
- UK Corporate Fixed Interest (i.e UK bonds) 7% (6%)
- Emerging Market Fixed Income 4% (0%)
- North American Equities 11% (8%)
- European Equities 4% (8%)
- Japanese Equities 0% (0%)
- Property 10% (7%)
- UK Equities 17% (25%)
- Gilts 6% (6%)
- Cash 3% (5%)
- Emerging market equities 0% (0%)
- Other international equities 4% (6%)
- Asian Equities 3% (0%)
- Commodities and Energy 3% (3%)
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 outperformed the average managed fund and the market.
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