80-20 Investor Best of the Best Selection – May 2017 Update

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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