80-20 Investor Best of the Best Selection – May 2018 Update

Commentary

April was a good month for UK investors as a surprise slump in the value of the pound boosted UK equity returns and amplified those of overseas assets. Riskier assets once again outperformed lower risk assets (such as bonds) with funds invested in large-cap UK companies rallying the most. From last month's selection Schroder Income produced an astounding 7.89% in April alone! Other stand-out performers include Natixis H2O MultiReturns (up 7%), Schroder Global Equity Income (up 6.8%), Schroder Income Maximiser (up 6.43%) and AXA Framlington American Growth (up 5.81%). Down the other end of the spectrum bond market weakness hampered bond funds and their returns ranged from +0.5% to -1.16%.

If you look at the latest heatmap you can see this overall trend replicated in April's column. With rising US Treasury yields spooking investors bond funds struggled, especially those investing in government debt such as treasuries and gilts. The ability of bonds to effectively diversify an equity portfolio in the current environment has once again been called into question and perhaps it is no surprise that the BOTB's bond exposure has dropped from 24% to 13%, with more emphasis being placed on property and alternative strategies.

UK equities have gained a greater exposure in this month's BOTB as the falling pound boosted their returns while US equities have been marginally increased, despite the ongoing trade war angst and a rising dollar. Interestingly, a technology fund does make the cut in the high-risk section of the BOTB after the sector staged something of rebound in April.

Once again ‘income’ funds have a notable presence which is not surprising as their defensive bias often helps them fare better in a struggling equity market. Of course if equity markets rally then these funds will likely lag their more cyclically focused peers. The BOTB once again contains a number of smaller companies funds which is perhaps a reflection of investors' continued preference for domestically focused stocks in the face of an escalating trade war.

In May's BOTB there are 15 funds that have regained their position. Of those funds that are new many are familiar from past months' BOTB selections while many of the funds that lost their place in this month's BOTB remain in their respective BFBS shortlists. It is notable that once again there is no exposure to European equities in this month's BOTB. European stocks have struggled with the German Dax only now starting to enjoy something of a rebound.

In terms of direct equity exposure, the BOTB's exposure has risen slightly from 51% last month to 56% this month. At the foot of this article you can see how the 80-20 Investor Selection has continued to outperform the professional fund managers as well as the market since its launch more than three years ago.

Below I list this month's selection in full with the 15 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
Aberdeen Diversified Core Growth	Mixed Investment 20-60% Shares	GB00BVTW3820	Low risk
Artemis US Select	North America	GB00BMMV5105	High risk
AXA Framlington American Growth	North America	GB00B5LXGG05	High risk
AXA Framlington Global Technology	Technology & Telecommunication	GB00B4W52V57	High risk
Baillie Gifford Global Discovery	Global	GB0006059330	Medium risk
Baillie Gifford Japanese	Japan	GB0006011133	High risk
EdenTree Higher Income	Mixed Investment 40-85% Shares	GB0009449710	Medium risk
F&C Property Growth and Income	Property	GB00BQWJ8687	Low risk
Fidelity Asia	Asia Pacific Excluding Japan	GB00B6Y7NF43	High risk
JOHCM UK Equity Income	UK Equity Income	GB00B03KR500	High risk
JPM Japan	Japan	GB0030879471	High risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	Medium risk
Jupiter UK Smaller Companies	UK Smaller Companies	GB0004911870	Medium risk
L&G UK Property	Property	GB00BK35DV33	Low risk
LF Canlife Managed 0%-35%	Mixed Investment 0-35% Shares	GB00BZ005541	Low risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	Medium risk
McInroy & Wood Smaller Companies	Global	GB00B8NC4D98	Medium risk
MI Chelverton UK Equity Growth	UK All Companies	GB00BP855B75	Medium risk
Neptune China	China/Greater China	GB00B5Q38588	High risk
Premier Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Medium risk
Premier Pan European Property Share	Property	GB00B65PFY02	High risk
Sarasin Global Dividend (Sterling Hedged)	Global Equity Income	GB00BGDF8439	Medium risk
Schroder European Equity Absolute Return	Targeted Absolute Return	GB00B39VWX15	Low risk
Schroder High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Schroder Income	UK Equity Income	GB00B3PM1190	Medium risk
Schroder Income Maximiser	UK Equity Income	GB00B5B0KM51	High risk
Schroder Mixed Distribution	Mixed Investment 20-60% Shares	GB00B78ST188	Low risk
Schroder Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
Schroder Strategic Bond	Sterling Strategic Bond	GB00B7FPS593	Low risk
VT Tcam Absolute Return Portfolio	Targeted Absolute Return	GB00B4QPB031	Low 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
Aberdeen Diversified Core Growth	Mixed Investment 20-60% Shares	GB00BVTW3820	Low risk
F&C Property Growth and Income	Property	GB00BQWJ8687	Low risk
L&G UK Property	Property	GB00BK35DV33	Low risk
LF Canlife Managed 0%-35%	Mixed Investment 0-35% Shares	GB00BZ005541	Low risk
Schroder European Equity Absolute Return	Targeted Absolute Return	GB00B39VWX15	Low risk
Schroder High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Schroder Mixed Distribution	Mixed Investment 20-60% Shares	GB00B78ST188	Low risk
Schroder Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
Schroder Strategic Bond	Sterling Strategic Bond	GB00B7FPS593	Low risk
VT Tcam Absolute Return Portfolio	Targeted Absolute Return	GB00B4QPB031	Low risk
Baillie Gifford Global Discovery	Global	GB0006059330	Medium risk
EdenTree Higher Income	Mixed Investment 40-85% Shares	GB0009449710	Medium risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	Medium risk
Jupiter UK Smaller Companies	UK Smaller Companies	GB0004911870	Medium risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	Medium risk
McInroy & Wood Smaller Companies	Global	GB00B8NC4D98	Medium risk
MI Chelverton UK Equity Growth	UK All Companies	GB00BP855B75	Medium risk
Premier Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Medium risk
Sarasin Global Dividend (Sterling Hedged)	Global Equity Income	GB00BGDF8439	Medium risk
Schroder Income	UK Equity Income	GB00B3PM1190	Medium risk
Artemis US Select	North America	GB00BMMV5105	High risk
AXA Framlington American Growth	North America	GB00B5LXGG05	High risk
AXA Framlington Global Technology	Technology & Telecommunication	GB00B4W52V57	High risk
Baillie Gifford Japanese	Japan	GB0006011133	High risk
Fidelity Asia	Asia Pacific Excluding Japan	GB00B6Y7NF43	High risk
JOHCM UK Equity Income	UK Equity Income	GB00B03KR500	High risk
JPM Japan	Japan	GB0030879471	High risk
Neptune China	China/Greater China	GB00B5Q38588	High risk
Premier Pan European Property Share	Property	GB00B65PFY02	High risk
Schroder Income Maximiser	UK Equity Income	GB00B5B0KM51	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
AXA Framlington Japan	Japan	GB00BRJZVR88	High risk
Baillie Gifford Japanese Income Growth	Japan	GB00BYZJQG71	High risk
Baring Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	High risk
CFP SDL UK Buffettology	UK All Companies	GB00B3QQFJ66	High risk
FP Pictet Multi Asset Portfolio	Targeted Absolute Return	GB00BVYTTC41	Low risk
Janus Henderson China Opportunities	China/Greater China	GB0031860934	High risk
JPM Global Macro Balanced	Mixed Investment 0-35% Shares	GB00B09RGK38	Low risk
Natixis H2O MultiReturns	Targeted Absolute Return	GB00BFNXSH36	Medium risk
Old Mutual Corporate Bond	Sterling Corporate Bond	GB00B1XG7X39	Low risk
Royal London Global Index Linked	Global Bonds	GB00B772RM82	Low risk
Schroder Global Equity Income	Global Equity Income	GB00B76V7M69	Medium risk
Standard Life Investments Global Emerging Markets Equity	Global Emerging Markets	GB00B7ZMKJ84	High risk
Standard Life Investments Global Index Linked Bond	Global Bonds	GB00B7C0H946	Low risk
Standard Life Investments UK Gilt	UK Gilts	GB00B6WZXS38	Medium risk
Threadneedle China Opportunities	China/Greater China	GB00B1PRW734	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 8% (17%)
• Alternatives 19% (15%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 5% (7%)
• Emerging Market Fixed Interest 0% (0%)
• North American Equities 14% (9%)
• European Equities 0% (0%)
• Japanese Equities 10% (11%)
• Property 8% (3%)
• UK Equities 22% (17%)
• Cash 4% (7%)
• Asian equities 3% (3%)
• Asia Pacific Emerging equities 5% (8%)
• Other international equities 2% (3%)

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.

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