80-20 Investor Best of the Best Selection – October 2015 Update

A total of 9 funds from September's 23 funds make it into October's selection. Below I list this month's selection in full with the 9 funds that regained their place in black while the new additions are in green.

Just as last time, I have included the full list sorted alphabetically by name and then by risk category.

October'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)

Fund	Sector	ISIN Code	Risk Level
Aberdeen - Property Trust	Property	GB00B036Z329	Low risk
AXA - Framlington UK Smaller Cos	UK Smaller Companies	GB0030310857	Medium risk
BlackRock - European Absolute Alpha	Targeted Absolute Return	GB00B4Y62T40	Low risk
CF - Miton UK Value Opportunities	UK All Companies	GB00B8KV0M06	Medium risk
FP - Miton Undervalued Assets	UK All Companies	GB00B3BSKG91	Medium risk
Fundsmith - Equity	Global	GB00B4LPDJ14	High risk
Invesco Perpetual - European Opportunities	Europe Excluding UK	GB00B28J0N53	High risk
JPM - UK Smaller Companies	UK Smaller Companies	GB0030880255	Medium risk
Jupiter - European	Europe Excluding UK	GB0006664683	High risk
L&G - Dynamic Bond	Sterling Strategic Bond	GB00B1TWMW95	Low risk
Liontrust - UK Smaller Companies	UK Smaller Companies	GB0007420788	Medium risk
M&G - Property Portfolio	Property	GB00B8G41W07	Low risk
Man GLG - Continental European Growth	Europe Excluding UK	GB00B0119370	High risk
Marlborough - UK Micro Cap Growth	UK Smaller Companies	GB00B02TPH60	Medium risk
Premier - Multi-Asset Conservative Growth	Mixed Investment 20%-60% Shares	GB0030439946	Low risk
R&M - UK Equity Smaller Companies	UK Smaller Companies	GB00B1DSZR91	Medium risk
Schroder - Absolute UK Dynamic	Targeted Absolute Return	GB00B3N74T57	Medium risk
Schroder - UK Dynamic Smaller Companies	UK Smaller Companies	GB0031092942	Medium risk
Unicorn - UK Smaller Companies	UK Smaller Companies	GB0031785065	Medium risk

 

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

Here is October's shortlist grouped by their risk category (funds unchanged from last month are in black while new additions are in green):

 

Fund	Sector	ISIN Code	Risk Level
Aberdeen - Property Trust	Property	GB00B036Z329	Low risk
BlackRock - European Absolute Alpha	Targeted Absolute Return	GB00B4Y62T40	Low risk
L&G - Dynamic Bond	Sterling Strategic Bond	GB00B1TWMW95	Low risk
M&G - Property Portfolio	Property	GB00B8G41W07	Low risk
Premier - Multi-Asset Conservative Growth	Mixed Investment 20%-60% Shares	GB0030439946	Low risk
AXA - Framlington UK Smaller Cos	UK Smaller Companies	GB0030310857	Medium risk
CF - Miton UK Value Opportunities	UK All Companies	GB00B8KV0M06	Medium risk
FP - Miton Undervalued Assets	UK All Companies	GB00B3BSKG91	Medium risk
JPM - UK Smaller Companies	UK Smaller Companies	GB0030880255	Medium risk
Liontrust - UK Smaller Companies	UK Smaller Companies	GB0007420788	Medium risk
Marlborough - UK Micro Cap Growth	UK Smaller Companies	GB00B02TPH60	Medium risk
R&M - UK Equity Smaller Companies	UK Smaller Companies	GB00B1DSZR91	Medium risk
Schroder - Absolute UK Dynamic	Targeted Absolute Return	GB00B3N74T57	Medium risk
Schroder - UK Dynamic Smaller Companies	UK Smaller Companies	GB0031092942	Medium risk
Unicorn - UK Smaller Companies	UK Smaller Companies	GB0031785065	Medium risk
Fundsmith - Equity	Global	GB00B4LPDJ14	High risk
Invesco Perpetual - European Opportunities	Europe Excluding UK	GB00B28J0N53	High risk
Jupiter - European	Europe Excluding UK	GB0006664683	High risk
Man GLG - Continental European Growth	Europe Excluding UK	GB00B0119370	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 Best of the Best list are listed below. Many of them remain in the Best funds by Sector selection:

Fund	Sector	ISIN Code	Risk Level
Aberdeen - European High Yield Bond	Sterling High Yield	GB00B5968F40	Low risk
Argonaut - FP Argonaut European Alpha	Europe Excluding UK	GB00B4ZRCD05	High risk
Artemis - Pan-European Absolute Return	Targeted Absolute Return	GB00BMMV4J16	Medium risk
Aviva Inv - European Equity	Europe Excluding UK	GB0032494246	High risk
BlackRock - UK Absolute Alpha	Targeted Absolute Return	GB00B06L9G55	Medium risk
Fidelity - Japan Smaller Companies	Japan	GB0003860565	High risk
Kames - UK Smaller Companies	UK Smaller Companies	GB00B142FH03	Medium risk
Marlborough - High Yield Fixed Interest	Sterling High Yield	GB00B03TN153	Low risk
Old Mutual - UK Mid Cap	UK All Companies	GB00B1XG7999	Medium risk
Premier - Global Alpha Growth	Global	GB00B2QXTP49	High risk
Schroder - Monthly High Income	Sterling High Yield	GB0009505693	Low risk
Schroder - Strategic Credit	Sterling Strategic Bond	GB00B11DNZ00	Low risk
Schroder - UK Smaller Companies	UK Smaller Companies	GB0007649535	Medium risk
Standard Life Investments - Ignis High Income Bond	Sterling High Yield	GB0009515957	Low risk

 

Commentary

You will recall that at the start of September there was a substantial reduction in the level of risk being taken by the Best of the Best Selection. At the time I said of the changes:

The noticeable feature is that a number of absolute return funds which use alternative strategies have entered the selection. It is the first time that so many absolute return funds have made the grade. There is certainly a reduction in risk when you look at the Best of the Best Selection this month.

In September's monthly newsletter I also warned 80-20 Investor members:

If you look at the analysis of this month's Heatmap and the Best of the Best Selection both are suggesting that now is a good time to reduce your level of risk in your portfolio and head for relatively safer waters.

Well that was exactly the right thing to have done as at one point in September the FTSE 100 tumbled by a further 5%. Thanks to the 80-20 Investor's algorithm the Best of the Best Selection was barely affected as the shortlist had taken a more defensive tilt. This meant that the Best of the Best Selection has managed to extend its outperformance over the market and professional fund managers (see chart at the foot of the article).

October's shortlist continues where September's shortlist left off by focusing on strategies, such as property, that reduce the overall exposure to market volatility. This month the portfolio has become even more concentrated with 19 funds. The equity part of the portfolio once again has a UK Smaller companies and European focus. Interestingly the US equity exposure is minimal while Japanese equity funds have made way for increased UK equity exposure and the introduction of the property funds.

A number of absolute return funds which use alternative strategies are once again included in this month's selection. Also the risk-reduction theme continues, emphasised by the fact that only 4 high risk funds make the grade (usually there are up to 10).

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:

• UK Equities 48% (30%)
• Global Fixed Interest 0% (13%)
• Alternative strategies 6% (13%)
• European Equities 16% (12%)
• UK Corporate Fixed Interest (i.e UK bonds)  6% (11%)
• Japanese Equities 0% (5%)
• North American Equities 3% (3%)
• Property 10% (0%)
• Cash 6% (0%)

The remainder is made up of other international equities.

80-20 Investor's outperformance continues even during the market sell-off

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 shows how a portfolio would have performed over the last year 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 balanced managed fund (red line) and the average managed fund with up to 85% equity exposure (blue 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 (currently it has an 80% exposure to equities). 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 outperformed the average UK fund manager by 6.43%!  Yet what is even more impressive is that the margin of outperformance has widened since the market crash started. Prior to the crash the level of 80-20 investor outperformance was 5.85%. As I mentioned above, the level of outperformance is now 6.43%

So not only has the 80-20 Investor algorithm outperformed when markets rallied but also when they crashed.

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