Commentary
Following on from a stellar January the BOTB started February very strongly as can be seen in the chart below. But as was expected February became a month of two halves with a bond market sell-off which ultimately unsettled equity markets.
In a market where both bonds and equities fall in tandem, there is no hiding place other than cash and as I explained in last week’s newsletter all boats sink at once, as emphasised by how the average professionally managed portfolios in the chart above, fell in tandem despite differing equity components.
Inevitably the BOTB gave up some of its monthly profit, as shown in the chart above. The best performing funds during the first half of the month were generally the worst-performing funds in the second half of February. The table below shows the top 7 performers within the BOTB across the whole month. UK small cap and value plays top the table but it is also interesting to see Barings Global Agriculture, which is an inflation play and a recent addition to the BOTB, among the top performers.
| Fund | % return in February |
| Premier Miton UK Smaller Companies | 14 |
| Premier Miton UK Value Opportunities | 8.09 |
| Barings Global Agriculture | 5.97 |
| MI Chelverton UK Equity Growth | 4.19 |
| FP Octopus UK Micro Cap Growth | 3.18 |
| Baillie Gifford Pacific | 3.03 |
| Schroder UK Dynamic Absolute Return | 2.57 |
Despite the market wobble the BOTB, as a whole, finished the month in positive territory, which explains why 19 out of last month’s selection have retained their place. A notable absentee is the tech-heavy Baillie Gifford Long Term Global Growth Investment fund, which has been a mainstay of the BOTB since the market rebounded after the Covid-19 crash. The fund is up 98.60%, almost doubling, since its first inclusion in the BOTB in April 2020. This compares to an average return of 40.27% from its peers. However, its performance has been disappointing, by comparison, over the last six months and the fund also lost 4.14% during February. So the fund has dropped out of the BOTB for now. Interestingly the change was made just ahead of further technology stock weakness in the first week of March.
The BOTB's European equity exposure has been reduced again and removed completely. This month there is a move away from funds with a more growth/technology focus, noted by the reduced number of Baillie Gifford funds. JPM Natural Resources, a new introduction this month, is another commodity/inflation play that has performed well year to date. Japanese equities return to the fold at the expense of Chinese equities. Fidelity UK Smaller Companies also returns after a period of absenteeism while Asian and emerging markets still make up the largest equity component of the BOTB's asset mix, followed closely by UK equities. Once again we see a mix of value-focused funds and growth funds throughout the selection. The overall equity exposure sits around 62%.
Gilts remain excluded from the low-risk portion of the BOTB which instead has increased exposure to Targeted Absolute Return funds in the face of the bond market sell-off.
At the foot of this article, you can see how the 80-20 Investor selection continues to outperform the professional fund managers as well as the market since its launch six and a half years ago.
Below I list this month's selection in full with the 19 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 |
| Allianz Total Return Asian Equity | Asia Pacific Excluding Japan | GB00B1FRQV53 | Medium risk |
| ASI Strategic Bond | Sterling Strategic Bond | GB00BWK27X12 | Low risk |
| Baillie Gifford Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Barclays Multi-Asset Cautious | Mixed Investment 0-35% Shares | GB00BD93Z723 | Low risk |
| Barings Global Agriculture | Specialist | GB00B3B9V927 | High risk |
| Close Select Fixed Income | Sterling Strategic Bond | GB00BD6R7Y87 | Low risk |
| ES R&M UK Recovery | UK All Companies | GB00B614J053 | Medium risk |
| Fidelity Global High Yield | Sterling High Yield | GB00B7K7SQ18 | Low risk |
| Fidelity Japan | Japan | GB00B882N041 | Medium risk |
| Fidelity UK Smaller Companies | UK Smaller Companies | GB00B7VNMB18 | High risk |
| FP Octopus UK Micro Cap Growth | UK Smaller Companies | GB00BYQ7HN43 | High risk |
| FP Pictet Multi Asset Portfolio | Targeted Absolute Return | GB00BVYTTC41 | Low risk |
| FSSA Greater China Growth | China/Greater China | GB0033874321 | Medium risk |
| Invesco Asian Equity Income (UK) | Asia Pacific Excluding Japan | GB00B4JR4R48 | Medium risk |
| Invesco Global Emerging Markets (UK) | Global Emerging Markets | GB00B3RW7S64 | High risk |
| JPM Natural Resources | Specialist | GB0031835118 | High risk |
| Liontrust Global Dividend | Global Equity Income | GB00B9225P64 | Medium risk |
| Liontrust Global Smaller Companies | Global | GB00B29MXF68 | High risk |
| Liontrust India | Specialist | GB00B1L6DV51 | High risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | Medium risk |
| Premier Miton Defensive Growth | Targeted Absolute Return | GB00B832BD89 | Low risk |
| Premier Miton Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| Premier Miton UK Smaller Companies | UK Smaller Companies | GB00B818N094 | High risk |
| Schroder MM Diversity | Mixed Investment 20-60% Shares | GB00B60CZD52 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| T. Rowe Price Global Focused Growth Equity | Global | GB00BD446774 | Medium risk |
| Threadneedle Dynamic Real Return | Targeted Absolute Return | GB00B93TQ868 | Low risk |
| VT Tyndall North American | North America | GB00BYPZY050 | 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 | GB00BWK27X12 | Low risk |
| Barclays Multi-Asset Cautious | Mixed Investment 0-35% Shares | GB00BD93Z723 | Low risk |
| Close Select Fixed Income | Sterling Strategic Bond | GB00BD6R7Y87 | Low risk |
| Fidelity Global High Yield | Sterling High Yield | GB00B7K7SQ18 | Low risk |
| FP Pictet Multi Asset Portfolio | Targeted Absolute Return | GB00BVYTTC41 | Low risk |
| Merian Monthly Income Bond | Sterling Strategic Bond | GB00B1XG8187 | Low risk |
| Premier Miton Defensive Growth | Targeted Absolute Return | GB00B832BD89 | Low risk |
| Schroder MM Diversity | Mixed Investment 20-60% Shares | GB00B60CZD52 | Low risk |
| Schroder UK Dynamic Absolute Return | Targeted Absolute Return | GB00B3N74T57 | Low risk |
| Threadneedle Dynamic Real Return | Targeted Absolute Return | GB00B93TQ868 | Low risk |
| Allianz Total Return Asian Equity | Asia Pacific Excluding Japan | GB00B1FRQV53 | Medium risk |
| ES R&M UK Recovery | UK All Companies | GB00B614J053 | Medium risk |
| Fidelity Japan | Japan | GB00B882N041 | Medium risk |
| FSSA Greater China Growth | China/Greater China | GB0033874321 | Medium risk |
| Invesco Asian Equity Income (UK) | Asia Pacific Excluding Japan | GB00B4JR4R48 | Medium risk |
| Liontrust Global Dividend | Global Equity Income | GB00B9225P64 | Medium risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | Medium risk |
| Premier Miton Diversified Growth | Mixed Investment 40-85% Shares | GB00B8BJV423 | Medium risk |
| T. Rowe Price Global Focused Growth Equity | Global | GB00BD446774 | Medium risk |
| VT Tyndall North American | North America | GB00BYPZY050 | Medium risk |
| Baillie Gifford Pacific | Asia Pacific Excluding Japan | GB0006063233 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Barings Global Agriculture | Specialist | GB00B3B9V927 | High risk |
| Fidelity UK Smaller Companies | UK Smaller Companies | GB00B7VNMB18 | High risk |
| FP Octopus UK Micro Cap Growth | UK Smaller Companies | GB00BYQ7HN43 | High risk |
| Invesco Global Emerging Markets (UK) | Global Emerging Markets | GB00B3RW7S64 | High risk |
| JPM Natural Resources | Specialist | GB0031835118 | High risk |
| Liontrust Global Smaller Companies | Global | GB00B29MXF68 | High risk |
| Liontrust India | Specialist | GB00B1L6DV51 | High risk |
| Premier Miton UK Smaller Companies | UK Smaller Companies | GB00B818N094 | 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:
| Name | Sector | ISIN Code | Risk |
| 7IM Moderately Cautious | Mixed Investment 0-35% Shares | GB0033953497 | Low risk |
| Baillie Gifford Long Term Global Growth Investment | Global | GB00BD5Z0Z54 | High risk |
| Baillie Gifford Managed | Mixed Investment 40-85% Shares | GB0006010168 | Medium risk |
| Barings Eastern Trust | Asia Pacific Excluding Japan | GB0000799923 | Medium risk |
| Barings Korea Trust | Specialist | GB0000840719 | High risk |
| Fidelity China Consumer | China/Greater China | GB00B82ZSC67 | Medium risk |
| Fidelity Multi Asset Open Defensive | Mixed Investment 0-35% Shares | GB00BC7GXK56 | Low risk |
| LF Miton UK Value Opportunities | UK All Companies | GB00B8KV0M06 | High risk |
| Liontrust Global Alpha | Flexible Investment | GB0031190555 | Medium risk |
| Rathbone Ethical Bond Fund | Sterling Corporate Bond | GB0030957137 | Low risk |
| Stewart Investors Asia Pacific Sustainability. | Specialist | GB00B0TY6V50 | Medium 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 15% (17%)
- Alternatives 17% (12%) - includes absolute return strategies & some bond exposure
- UK Corporate Fixed Interest (i.e UK bonds) 2% (5%)
- Emerging Market Fixed Income 0% (0%)
- North American Equities 12% (14%)
- European Equities 0% (3%)
- Chinese Equities 4% (7%)
- Japanese Equities 4% (0%)
- Property 0% (0%)
- UK Equities 17% (15%)
- Gilts 0% (0%)
- Cash 4% (4%)
- Emerging market equities 4% (4%)
- Other international equities 3% (0%)
- Asian Equities 11% (15%)
- Commodities and Energy 7% (4%)
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 40-60% 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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