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

Commentary

This month's BOTB sees some of the most wide-ranging changes for some time with only 6 funds from October's BOTB remaining in this month’s list. While many from last month’s BOTB remain in the BFBS lists there was a dynamic shift in momentum during October as the market rushed to reprice assets in view of higher future inflation prospects and tighter monetary policy.

As you can see from this month's heatmap cash and bonds were the only real havens given that 90% of funds, regardless of the underlying asset they invested in, lost money. In such an indiscriminate sell-off all investment strategies are hit, especially momentum. Unsurprisingly it was a weak month for the BOTB with an average decline of 5.44% versus 4.63% for the average managed multi-asset fund. Not a huge difference but a difference nonetheless.

Looking at the equity content of the BOTB it has moved completely out of Asian and Japanese stocks and is now split between US, UK and European stocks. In fact, the exposure to US equities has ticked up slightly still reflecting the fact that despite the sell-off it is still the best performing developed world stock market (in sterling terms).

The overall equity content of the BOTB has dropped from 65% down to 44% but it is not surprising that the level of risk has been reduced given the uncertainty in investment markets right now. There is an increased exposure to bond funds and defensively positioned equity funds (as evidenced by the rise in equity income funds). The latter tend to focus on consumer staples such as pharmaceuticals and tobacco (i.e. things people won’t cut back on even during a recession). There is also a nod to the dollar strength (Newton International Bond is something of a dollar/GBP proxy albeit also influenced by bond movements) which is a trade that has performed well during the autumn unease.

The exposure to property funds that invest in actual buildings (rather than equities has gone up) and perhaps my concern regarding the liquidity of property funds (and why I don’t personally hold them in my £50k portfolio), if a Brexit deal is forged this month as promised, will prove overly cautious.

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 four years ago.

Below I list this month's selection in full with the 6 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.

November'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 UK Property	UK Direct Property	GB00BTLX1F24	Low risk
AXA Sterling Index Linked Bond	UK Index Linked Gilts	GB00B02Y6B22	Medium risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
BlackRock US Dynamic	North America	GB00B87XJQ69	High risk
Carvetian Electric & General Investment	Global	GB00B52CBS38	High risk
Close Diversified Income Portfolio	Mixed Investment 20-60% Shares	GB00B708TJ43	Low risk
Fidelity Global Dividend	Global Equity Income	GB00B7GJPN73	Medium risk
Fidelity Multi Asset Allocator Growth	Mixed Investment 40-85% Shares	GB00B9C3GS90	Medium risk
L&G Global Health & Pharmaceuticals Index Trust	Global	GB00B0CNH387	High risk
L&G Global Technology Index Trust	Technology & Telecommunications	GB00B0CNH163	High risk
LF Canlife North American	North America	GB00B73N3278	High risk
M&G Index-Linked Bond	UK Index Linked Gilts	GB0031111478	Medium risk
Man GLG Corporate Bond	Global Bonds	GB00B0118B85	Low risk
Morgan Stanley Global Brands	Global	GB0032482498	High risk
Neptune US Income	North America	GB00B909H978	High risk
Newton Global Income	Global Equity Income	GB00B0MY6T00	Medium risk
Newton International Bond	Global Bonds	GB0006779655	Low risk
Royal London Index Linked	UK Index Linked Gilts	GB00B8DDWW71	Medium risk
Schroder Global Healthcare	Global	GB00B76V7Q08	High risk
Standard Life Investments AAA Income	Sterling Corporate Bond	GB00B3W48X95	Low risk
Standard Life Investments Emerging Market Debt	Global Emerging Markets Bond	GB00B8K56P77	Medium risk
Standard Life Investments Global Real Estate	Property Other	GB00B774LD38	Low risk
Standard Life Investments UK Real Estate	UK Direct Property	GB00BYPHP536	Low risk
TB Evenlode Income	UK All Companies	GB00BD0B7D55	Medium risk
Thesis TM Sanditon European Select	Targeted Absolute Return	GB00BNY7Y722	Medium risk
Threadneedle Global Bond	Global Bonds	GB0001533685	Low risk
TIME Investments Commercial Freehold	UK Direct Property	GB00BLRZPX27	Low risk
Troy Asset Management Ltd Trojan Global Income	Global Equity Income	GB00BD82KP33	Medium risk
UBS S&P 500 Index	North America	GB00BMN91T34	High risk

 

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

Here is November'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 UK Property	UK Direct Property	GB00BTLX1F24	Low risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
Close Diversified Income Portfolio	Mixed Investment 20-60% Shares	GB00B708TJ43	Low risk
Man GLG Corporate Bond	Global Bonds	GB00B0118B85	Low risk
Newton International Bond	Global Bonds	GB0006779655	Low risk
Standard Life Investments AAA Income	Sterling Corporate Bond	GB00B3W48X95	Low risk
Standard Life Investments Global Real Estate	Property Other	GB00B774LD38	Low risk
Standard Life Investments UK Real Estate	UK Direct Property	GB00BYPHP536	Low risk
Threadneedle Global Bond	Global Bonds	GB0001533685	Low risk
TIME Investments Commercial Freehold	UK Direct Property	GB00BLRZPX27	Low risk
AXA Sterling Index Linked Bond	UK Index Linked Gilts	GB00B02Y6B22	Medium risk
Fidelity Global Dividend	Global Equity Income	GB00B7GJPN73	Medium risk
Fidelity Multi Asset Allocator Growth	Mixed Investment 40-85% Shares	GB00B9C3GS90	Medium risk
M&G Index-Linked Bond	UK Index Linked Gilts	GB0031111478	Medium risk
Newton Global Income	Global Equity Income	GB00B0MY6T00	Medium risk
Royal London Index Linked	UK Index Linked Gilts	GB00B8DDWW71	Medium risk
Standard Life Investments Emerging Market Debt	Global Emerging Markets Bond	GB00B8K56P77	Medium risk
TB Evenlode Income	UK All Companies	GB00BD0B7D55	Medium risk
Thesis TM Sanditon European Select	Targeted Absolute Return	GB00BNY7Y722	Medium risk
Troy Asset Management Ltd Trojan Global Income	Global Equity Income	GB00BD82KP33	Medium risk
BlackRock US Dynamic	North America	GB00B87XJQ69	High risk
Carvetian Electric & General Investment	Global	GB00B52CBS38	High risk
L&G Global Health & Pharmaceuticals Index Trust	Global	GB00B0CNH387	High risk
L&G Global Technology Index Trust	Technology & Telecommunications	GB00B0CNH163	High risk
LF Canlife North American	North America	GB00B73N3278	High risk
Morgan Stanley Global Brands	Global	GB0032482498	High risk
Neptune US Income	North America	GB00B909H978	High risk
Schroder Global Healthcare	Global	GB00B76V7Q08	High risk
UBS S&P 500 Index	North America	GB00BMN91T34	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
7IM Sustainable Balance	Mixed Investment 20-60% Shares	GB00B1LBFZ86	Low risk
AXA Framlington American Growth	North America	GB00B5LXGG05	High risk
AXA Framlington Global Technology	Technology & Telecommunications	GB00B4W52V57	High risk
AXA Global Distribution	Mixed Investment 20-60% Shares	GB0008309063	Low risk
Baillie Gifford Japanese Income Growth	Japan	GB00BYZJQG71	Medium risk
Baillie Gifford Positive Change	Global	GB00BYVGKV59	High risk
BlackRock NURS II Consensus 35	Mixed Investment 0-35% Shares	GB00B7W6H253	Low risk
Fidelity European	Europe Excluding UK	GB00BFRT3504	Medium risk
FP Octopus UK Micro Cap Growth	UK Smaller Companies	GB00BYQ7HN43	High risk
Fundsmith Equity	Global	GB00B4Q5X527	High risk
Janus Henderson US Growth	North America	GB0032438466	High risk
JPM Global High Yield Bond	Sterling High Yield	GB0008350976	Low risk
LF Livingbridge UK Micro Cap	UK Smaller Companies	GB00BV9FYS80	Medium risk
LF Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	High risk
Liontrust Sustainable Future Absolute Growth	Flexible Investment	GB0030029622	Medium risk
Liontrust Sustainable Future Defensive Managed	Mixed Investment 20-60% Shares	GB00BMN90635	Low risk
Liontrust Sustainable Future UK Growth	UK All Companies	GB0030028764	Medium risk
Neptune Global Technology	Technology & Telecommunications	GB00BYXZ5N79	High risk
Neptune US Opportunities	North America	GB00B7K9LQ88	High risk
Newton Real Return	Targeted Absolute Return	GB0001642635	Low risk
Sarasin Global Dividend	Global Equity Income	GB00BGDF8F44	Medium risk
Schroder Managed Wealth Portfolio	Mixed Investment 20-60% Shares	GB00B84YNB54	Low risk
Threadneedle Dynamic Real Return	Targeted Absolute Return	GB00B93TQ868	Low risk
VT Castlebay UK Equity	UK All Companies	GB00BV0LF607	Medium 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 18% (10%)
• Alternatives 19% (16%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 7% (0%)
• Emerging Market Fixed Interest 0% (0%)
• North American Equities 28% (26%)
• European Equities 5% (12%)
• Japanese Equities 0% (5%)
• Property 12% (4%)
• UK Equities 7% (19%)
• Cash 0% (5%)
• Asian equities 0% (0%)
• Asia Pacific Emerging equities 0% (0%)
• Other international equities 4% (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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