80-20 Investor Best of the Best Selection – May 2016 Update

Commentary

This month's 80-20 Investor Best of the Best Selection continues to reduce its exposure to risk, increasing its bond/fixed interest exposure at the expense of equities. In fact global bonds still account for the largest component of the portfolio and its exposure has increased  further this month. Although the portfolio now has a very low direct exposure to equities the 'alternatives' listed will include exposure to equities but via derivatives etc.

The breakdown of the portfolio's equity exposure has also changed. Exposure to UK equities has crept back in, albeit limited. US equities had been the main focus of the 80-20 Investor equity exposure but this has been dramatically reduced. This is interesting in light of the US market recently coming within a whisker of its all time highs. Perhaps this is a sign that markets have topped over there? The key equity theme within the portfolio is diversification with Asian equities making a reappearance and no one geographical location being overly dominant. What is surprising is that there is now no exposure to European equities within the portfolio which is the first time this has happened. Perhaps this is reflective of the market nervousness surrounding the impending EU referendum in the UK.

At the foot of this article you can see how the 80-20 Investor Portfolio has continued to outperform the professional fund managers as well as the market.

A total of 14 funds from April's 30 funds make it into May's selection. Below I list this month's selection in full with the 14 funds that regained their place in black while the new additions are in green.

Just as last time, I have included the full list sorted alphabetically by name and then by risk category.

May'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)

 

Fund name	Sector	ISIN Code	Risk level
Aberdeen - European High Yield Bond	Sterling High Yield	GB00B5968F40	Low risk
AXA - Framlington Japan	Japan	GB0003500179	High risk
AXA - Sterling Strategic Bond	Sterling Strategic Bond	GB00B0LLCW73	Low risk
Baillie Gifford - Emerging Markets Bond	Global Emerging Market Bond	GB00B39RMP13	Medium risk
Barclays - Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Low risk
BlackRock - NURS II Consensus 35	Mixed Investment 0%-35% Shares	GB00B7W6H253	Medium risk
CF - Prudential Dynamic Focused 0-30 Portfolio	Mixed Investment 0%-35% Shares	GB00B5BNX690	Low risk
CF Canlife - North American	North America	GB00B73N3278	High risk
Fidelity - Asia Pacific Opportunities	Asia Pacific Excluding Japan	GB00BQ1SWL90	High risk
Fidelity - Global Enhanced Income	Global Equity Income	GB00BD1NLL62	Medium risk
Fidelity - Index Pacific ex Japan	Asia Pacific Excluding Japan	GB00BLT1YS69	High risk
Fidelity - Strategic Bond	Sterling Strategic Bond	GB00B469J896	Low risk
First State - Global Listed Infrastructure	Global	GB00B24HJC53	High risk
Fundsmith - Equity	Global	GB00B4Q5X527	High risk
Henderson Inst - Overseas Bond	Global Bonds	GB0007673055	Medium risk
JPM - Japan	Japan	GB0030879471	High risk
L&G - All Stocks Gilt Index Trust	UK Gilts	GB00B8344798	Low risk
L&G - Emerging Markets Government Bond (US$) Index	Global Emerging Market Bond	GB00B7MJV331	Medium risk
L&G - Managed Monthly Income Trust	Sterling Corporate Bond	GB00B0CNHQ18	Low risk
L&G - Sterling Corporate Bond Index	Sterling Corporate Bond	GB00B4M01C47	Low risk
Legg Mason - IF Japan Equity	Japan	GB0033507467	High risk
McInroy & Wood - Balanced	Mixed Investment 40%-85% Shares	GB00B7RRJ163	Medium risk
MI - Chelverton UK Equity Growth	UK All Companies	GB00BP855B75	Medium risk
Schroder - Global Real Estate Securities Income	Property	GB00BDD2DJ32	High risk
Threadneedle - Emerging Market Bond	Global Emerging Market Bond	GB00B817DW83	Medium risk
Threadneedle - European Corporate Bond	Global Bonds	GB00B7MJ0253	Medium risk
Threadneedle - Global Bond	Global Bonds	GB00B8C2M701	Medium risk
Threadneedle - UK Social Bond	Sterling Corporate Bond	GB00BF233790	Low risk
Vanguard - LifeStrategy 20% Equity	Mixed Investment 0%-35% Shares	GB00B4NXY349	Low risk
VT - De Lisle America	North America	GB00B3QF3G69	High risk

May's Best of the Best Selection - (grouped by risk)

Here is May's shortlist grouped by their risk category (funds unchanged from last month are in black while new additions are in green):

 

Fund name	Sector	ISIN Code	Risk level
CF - Prudential Dynamic Focused 0-30 Portfolio	Mixed Investment 0%-35% Shares	GB00B5BNX690	Low risk
L&G - Sterling Corporate Bond Index	Sterling Corporate Bond	GB00B4M01C47	Low risk
L&G - Managed Monthly Income Trust	Sterling Corporate Bond	GB00B0CNHQ18	Low risk
Threadneedle - UK Social Bond	Sterling Corporate Bond	GB00BF233790	Low risk
Barclays - Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Low risk
L&G - All Stocks Gilt Index Trust	UK Gilts	GB00B8344798	Low risk
Aberdeen - European High Yield Bond	Sterling High Yield	GB00B5968F40	Low risk
Vanguard - LifeStrategy 20% Equity	Mixed Investment 0%-35% Shares	GB00B4NXY349	Low risk
AXA - Sterling Strategic Bond	Sterling Strategic Bond	GB00B0LLCW73	Low risk
Fidelity - Strategic Bond	Sterling Strategic Bond	GB00B469J896	Low risk
Baillie Gifford - Emerging Markets Bond	Global Emerging Market Bond	GB00B39RMP13	Medium risk
Henderson Inst - Overseas Bond	Global Bonds	GB0007673055	Medium risk
Threadneedle - European Corporate Bond	Global Bonds	GB00B7MJ0253	Medium risk
Threadneedle - Global Bond	Global Bonds	GB00B8C2M701	Medium risk
L&G - Emerging Markets Government Bond (US$) Index	Global Emerging Market Bond	GB00B7MJV331	Medium risk
Threadneedle - Emerging Market Bond	Global Emerging Market Bond	GB00B817DW83	Medium risk
McInroy & Wood - Balanced	Mixed Investment 40%-85% Shares	GB00B7RRJ163	Medium risk
Fidelity - Global Enhanced Income	Global Equity Income	GB00BD1NLL62	Medium risk
BlackRock - NURS II Consensus 35	Mixed Investment 0%-35% Shares	GB00B7W6H253	Medium risk
MI - Chelverton UK Equity Growth	UK All Companies	GB00BP855B75	Medium risk
Legg Mason - IF Japan Equity	Japan	GB0033507467	High risk
AXA - Framlington Japan	Japan	GB0003500179	High risk
CF Canlife - North American	North America	GB00B73N3278	High risk
JPM - Japan	Japan	GB0030879471	High risk
Schroder - Global Real Estate Securities Income	Property	GB00BDD2DJ32	High risk
Fidelity - Asia Pacific Opportunities	Asia Pacific Excluding Japan	GB00BQ1SWL90	High risk
VT - De Lisle America	North America	GB00B3QF3G69	High risk
Fidelity - Index Pacific ex Japan	Asia Pacific Excluding Japan	GB00BLT1YS69	High risk
First State - Global Listed Infrastructure	Global	GB00B24HJC53	High risk
Fundsmith - Equity	Global	GB00B4Q5X527	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 Best of the Best list are listed below. Many of them remain in the Best funds by Sector selection:

 

Fund name	Sector	ISIN Code	Risk level
Aberdeen - Euro Corporate Bond	Global Bonds	GB00BWK27T75	Medium risk
Aviva Inv - Higher Income Plus	Sterling Strategic Bond	GB0032494576	Low risk
AXA - Global Distribution	Mixed Investment 20%-60% Shares	GB0008309287	Medium risk
BlackRock - Corporate Bond	Sterling Corporate Bond	GB0005769541	Low risk
Henderson - UK Absolute Return	Targeted Absolute Return	GB00B5KKCS68	Low risk
HSBC - Pacific Index	Asia Pacific Excluding Japan	GB00B80QGR26	High risk
Investec - Global Franchise	Global	GB00B7WN9P32	High risk
JPM - Sterling Corporate Bond	Sterling Corporate Bond	GB0030877434	Low risk
L&G - Global Technology Index	Technology & Telecom	GB00B0CNH163	High risk
Legg Mason - IF ClearBridge US Equity Income	North America	GB00B3TTBW75	High risk
Liontrust - European Growth	Europe Excluding UK	GB00B1GKBD09	Medium risk
Man GLG - Continental European Growth	Europe Excluding UK	GB00B0119370	Medium risk
Neptune - US Income	North America	GB00B67N4T04	High risk
Newton - Real Return	Targeted Absolute Return	GB0006780323	Medium risk
Threadneedle - Dynamic Real Return	Targeted Absolute Return	GB00B93TQ868	Low risk
UBS - Sterling Corporate Bond Indexed	Sterling Corporate Bond	GB00B448L607	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  25% (21%)
• Alternatives/Other 18% (17%)
• UK Corporate Fixed Interest (i.e UK bonds) 12% (7%)
• North American Equities 12%  (17%)
• Japanese Equities 10% (8%)
• Asian equities 6% (0%)
• UK Equities 5% (0%)
• UK Gilts 4% (0%)
• Property 4% (4%)
• Cash 4%  (1%)
• European Equities 0% (9%)
• Other international equities 0% (6%)
• Emerging markets (0%)

80-20 Investor's outperformance continues even during the market sell-off

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.

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