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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