Commentary
Just 12 funds from last month's 30 Best of the Best (BOTB) Selection regained their position in this month's shortlist. Politics played its part with the result of the French Presidential election first round sending european equities scampering higher. In addition the surprise announcement of the UK general election caused the pound to rally strongly. A strengthening pound is bad news for investors' overseas funds as their value is immediately reduced due to the change in the currency exchange rate.
Unsurprisingly the BOTB's european equity exposure has risen this month and two hedged global funds have entered the mix. These funds are not affected by the currency exchange rates which is a good thing should the pound keep strengthening. This is the first time since before the Brexit vote that we've seen funds with a hedged currency exposure enter the BOTB. I've covered the outlook for the pound in my article Technical Analysis May 2017.
The BOTB's UK equity exposure remains almost exclusively via smaller companies funds. The UK Smaller Companies sector was the best performing sector in April (see the latest 80-20 Investor Heatmap) and comfortably outperformed its large cap counterpart (UK All Companies) in part due to the pound's rally dampening the FTSE 100. Interestingly managed funds have made a reappearance which reflects the fact that bond markets haven't collapsed so far this year as many had anticipated. Yes, the returns have been largely unexciting but they have been positive and fairly consistent.
Japanese equities have finally disappeared out of the BOTB as the recent strength of the yen has hit returns. The Japanese stock market tends to move in the opposite direction to the yen. So as the yen strengthens the stock market falls and vice versa due to the impact on exporters. However most of the Japanese funds that were in the BOTB remain in the latest BFBS tables. Looking at the low risk end of the portfolio a property fund has made a reappearance for the first time since the Brexit vote.
The underlying asset mix this month hasn't changed radically, aside from the omission of Japanese equities which could prove temporary. In terms of direct equity exposure the portfolio is still around 70%, on a par with last month. 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 since its launch almost three years ago.
Below I list this month's selection in full with the 12 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.
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)
| Name | Sector | ISIN Code | Risk Level |
| Artemis - Pan-European Absolute Return | Targeted Absolute Return | GB00BMMV4J16 | Medium risk |
| AXA - Global High Income | Sterling High Yield | GB00B0T9V375 | Low risk |
| Baillie Gifford - American | North America | GB0006061963 | High risk |
| Baillie Gifford - European | Europe Excluding UK | GB0006058258 | Medium risk |
| Barclays - Income Plus Portfolio | Mixed Investment 0%-35% Shares | GB00B6WYG696 | Low risk |
| Baring - European Growth | Europe Excluding UK | GB0000804335 | Medium risk |
| BlackRock - Asia Special Situations | Asia Pacific Excluding Japan | GB00BJGZZ065 | High risk |
| BlackRock - US Dynamic | North America | GB00B87XJQ69 | Medium risk |
| Cavendish - Opportunities | UK All Companies | GB0032212283 | Medium risk |
| Cavendish - Technology | Technology & Telecommunication | GB00B60SMN24 | High risk |
| EdenTree - Amity European | Europe Excluding UK | GB0008448333 | High risk |
| F&C - Property Growth and Income | Property | GB00BQWJ8687 | Low risk |
| FP - Apollo Multi Asset Cautious | Mixed Investment 20%-60% Shares | GB00B3FPDY55 | Low risk |
| Henderson - European Absolute Return | Targeted Absolute Return | GB00B3CPX151 | Low risk |
| Henderson - Global Technology | Technology & Telecommunication | GB0007698847 | High risk |
| L&G - High Income Trust | Sterling High Yield | GB00B0CNHJ41 | Low risk |
| Marlborough - European Multi-Cap | Europe Excluding UK | GB0001719730 | High risk |
| Premier - Diversified | Mixed Investment 40%-85% Shares | GB00B8BJV423 | Low risk |
| Sarasin - Fund of Funds - Global Equity | Flexible Investment | GB00B7YYSB32 | Medium risk |
| Sarasin - Global Higher Dividend (Sterling Hedged) | Global Equity Income | GB00B80S2X69 | Medium risk |
| Sarasin - Thematic Global Equity (Sterling Hedged) | Global | GB00B83F3755 | Medium risk |
| Schroder - High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Schroder - UK Dynamic Smaller Companies | UK Smaller Companies | GB0007220360 | High risk |
| Templeton - Global Total Return Bond | Global Bonds | GB00BKT0HX25 | Low risk |
| Threadneedle - UK Smaller Companies | UK Smaller Companies | GB0001530343 | High risk |
| TwentyFour - Dynamic Bond | Sterling Strategic Bond | GB00B5KPRZ34 | Low risk |
| UBS - US Equity | North America | GB00B7V68L26 | High risk |
| Unicorn - Mastertrust | Flexible Investment | GB0031269367 | Medium risk |
| Unicorn - UK Smaller Companies | UK Smaller Companies | GB0031785065 | High risk |
| Wise Investments - TB Wise Income | Flexible Investment | GB00B0LJ0160 | Medium 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):
| Name | Sector | ISIN Code | Risk Level |
| AXA - Global High Income | Sterling High Yield | GB00B0T9V375 | Low risk |
| Barclays - Income Plus Portfolio | Mixed Investment 0%-35% Shares | GB00B6WYG696 | Low risk |
| F&C - Property Growth and Income | Property | GB00BQWJ8687 | Low risk |
| FP - Apollo Multi Asset Cautious | Mixed Investment 20%-60% Shares | GB00B3FPDY55 | Low risk |
| Henderson - European Absolute Return | Targeted Absolute Return | GB00B3CPX151 | Low risk |
| L&G - High Income Trust | Sterling High Yield | GB00B0CNHJ41 | Low risk |
| Premier - Diversified | Mixed Investment 40%-85% Shares | GB00B8BJV423 | Low risk |
| Schroder - High Yield Opportunities | Sterling High Yield | GB00B83RDY83 | Low risk |
| Templeton - Global Total Return Bond | Global Bonds | GB00BKT0HX25 | Low risk |
| TwentyFour - Dynamic Bond | Sterling Strategic Bond | GB00B5KPRZ34 | Low risk |
| Artemis - Pan-European Absolute Return | Targeted Absolute Return | GB00BMMV4J16 | Medium risk |
| Baillie Gifford - European | Europe Excluding UK | GB0006058258 | Medium risk |
| Baring - European Growth | Europe Excluding UK | GB0000804335 | Medium risk |
| BlackRock - US Dynamic | North America | GB00B87XJQ69 | Medium risk |
| Cavendish - Opportunities | UK All Companies | GB0032212283 | Medium risk |
| Sarasin - Fund of Funds - Global Equity | Flexible Investment | GB00B7YYSB32 | Medium risk |
| Sarasin - Global Higher Dividend (Sterling Hedged) | Global Equity Income | GB00B80S2X69 | Medium risk |
| Sarasin - Thematic Global Equity (Sterling Hedged) | Global | GB00B83F3755 | Medium risk |
| Unicorn - Mastertrust | Flexible Investment | GB0031269367 | Medium risk |
| Wise Investments - TB Wise Income | Flexible Investment | GB00B0LJ0160 | Medium risk |
| Baillie Gifford - American | North America | GB0006061963 | High risk |
| BlackRock - Asia Special Situations | Asia Pacific Excluding Japan | GB00BJGZZ065 | High risk |
| Cavendish - Technology | Technology & Telecommunication | GB00B60SMN24 | High risk |
| EdenTree - Amity European | Europe Excluding UK | GB0008448333 | High risk |
| Henderson - Global Technology | Technology & Telecommunication | GB0007698847 | High risk |
| Marlborough - European Multi-Cap | Europe Excluding UK | GB0001719730 | High risk |
| Schroder - UK Dynamic Smaller Companies | UK Smaller Companies | GB0007220360 | High risk |
| Threadneedle - UK Smaller Companies | UK Smaller Companies | GB0001530343 | High risk |
| UBS - US Equity | North America | GB00B7V68L26 | High risk |
| Unicorn - UK Smaller Companies | UK Smaller Companies | GB0031785065 | 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 Level |
| 7IM - AAP Income | Mixed Investment 0%-35% Shares | GB0033954024 | Low risk |
| Artemis - Global Income | Global Equity Income | GB00B5N99561 | Medium risk |
| Artemis - Monthly Distribution | Mixed Investment 20%-60% Shares | GB00B6TK3R06 | Low risk |
| AXA - Framlington Global Technology | Technology & Telecommunication | GB00B4W52V57 | High risk |
| Cavendish - AIM | UK Smaller Companies | GB00B0JX3X39 | High risk |
| Fidelity - Global High Yield | Sterling High Yield | GB00B7K7SQ18 | Low risk |
| Fidelity - Global Special Situations | Global | GB00B8HT7153 | High risk |
| Investec - Cautious Managed | Mixed Investment 20%-60% Shares | GB00B8NZ3M08 | Low risk |
| JOHCM - UK Equity Income | UK Equity Income | GB00B03KR500 | Medium risk |
| M&G - Recovery | UK All Companies | GB00B7759Y38 | Medium risk |
| Man GLG - Japan Core Alpha | Japan | GB00B3F46Y30 | High risk |
| Marlborough - Far East Growth | Asia Pacific Excluding Japan | GB00B0NVCN62 | High risk |
| Old Mutual - Global Equity | Global | GB00B1XG8F22 | Medium risk |
| Old Mutual - North American Equity | North America | GB00B1XG8M98 | Medium risk |
| R&M - UK Equity Long Term Recovery | UK All Companies | GB00B614J053 | Medium risk |
| S&W - Saltus Wealth | Targeted Absolute Return | GB00B6RLZP73 | Low risk |
| TB Saracen - Global Income & Growth | Global Equity Income | GB00B8MG4091 | Medium risk |
| UBS - Emerging Markets Equity Income | Global Emerging Markets | GB00B8BDQ491 | 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 13% (12%)
- Alternatives 16% (14%) - includes absolute return strategies & property
- UK Corporate Fixed Interest (i.e UK bonds) 0% (0%)
- Emerging Market Fixed Interest 0% (2%)
- North American Equities 18% (18%)
- European Equities 12% (7%)
- Japanese Equities 0% (6%)
- Property 0% (0%)
- UK Equities 19% (20%)
- Cash 5% (4%)
- Asian equities 0% (0%)
- Asia Pacific Emerging equities 3% (0%)
- Other international equities 14% (17%) which includes Asian equities
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 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. The large spike in performance in the 80-20 Investor portfolio on the right hand side of the chart is where the portfolio rallied after the Brexit referendum while global markets plummeted.
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