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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