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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