80-20 Investor Best of the Best Selection – October 2017 Update

Commentary

17 funds from last month's 30 Best of the Best (BOTB) Selection regained their position in this month's shortlist. Most of those that didn't regain their place in this month's BOTB list remain in their respective Best Funds by Sector (BFBS) lists. The level of consistency in the BOTB selection is a reflection of the continued uptrend in equities. While September is historically a tough month for stock markets it wasn't especially the case this year. However the volatility of the pound had a disproportionate effect on UK investor returns so they did not enjoy the profits experienced by their US counterparts. If you look at the latest heatmap September was a very mixed month in terms of risk/return. Usually the red (hot) sectors are fairly bunched but September saw both low risk investments (bonds and cash) outperform alongside one or two equity sectors.

One interesting theme was that smaller companies across Europe, UK and the US enjoyed a strong September. In part this could be a sign that the breadth of the market rally is widening (a good thing) or a reflection of how volatile currency markets were during the month. Smaller companies tend to be more domestic focused (and export less) so can be less impacted by wild currency moves. Emerging markets and China cooled slightly in September, after a stellar summer run, so there's been a slight reduction in the BOTB's exposure to the former. UK equities were the chief beneficiaries. Baillie Gifford China has finally slipped out of the BOTB after a long residency due to the level of risk the fund was taking versus its peers. Performance remains strong for the fund but the 80-20 Investor algorithm screened it out as I explain in more detail in my October review of my own portfolio.

There are no noticeable movers between risk levels this month. The only exception is Cavendish Aim which moves back into the high risk section. The BOTB asset mix continues to be diversified with the medium risk portion of the selection now dominated by funds with direct equity exposure, as opposed to managed multi-asset funds. In terms of direct equity exposure the portfolio's exposure is slightly down on last month and sits around 62%. 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 three years ago.

Below I list this month's selection in full with the 17 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.

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)

Name	Sector	ISIN Code	Risk
Aberdeen - Emerging Markets Bond	Global Emerging Markets Bond	GB00B5L9HN22	Medium risk
Artemis - High Income	Sterling Strategic Bond	GB00B2PLJN71	Low risk
Artemis - US Select	North America	GB00BMMV5105	Medium risk
AXA - Framlington Monthly Income	UK Equity Income	GB00B7MMK577	Medium risk
Baillie Gifford - American	North America	GB0006061963	Medium risk
Baillie Gifford - Emerging Markets Growth	Global Emerging Markets	GB0006020647	High risk
Baillie Gifford - Global Select	Global	GB00BYNK7G95	Medium risk
Baring - Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	High risk
BlackRock - European Dynamic	Europe Excluding UK	GB00B5W2QB11	High risk
CF - Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	High risk
CF - Seneca Diversified Growth	Mixed Investment 40-85% Shares	GB00B7FPW579	Low risk
CF - Seneca Diversified Income	Mixed Investment 20-60% Shares	GB00B7JTF560	Low risk
F&C - Property Growth and Income	Property	GB00BQWJ8687	Medium risk
Fidelity - China Consumer	China/Greater China	GB00B82ZSC67	High risk
Henderson - China Opportunities	China/Greater China	GB0031860934	High risk
Henderson - Fixed Interest Monthly Income	Sterling Strategic Bond	GB0001920486	Low risk
JPM - Global Macro Balanced	Mixed Investment 0-35% Shares	GB00B09RGK38	Low risk
Jupiter - European	Europe Excluding UK	GB0006664683	High risk
Jupiter - UK Smaller Companies Acc	UK Smaller Companies	GB0004911870	Medium risk
M&G - Fund of Investment Trust Shares	Global	GB0031288680	Medium risk
Man GLG - Strategic Bond	Sterling Strategic Bond	GB00B731HR48	Low risk
Man GLG - UK Income	UK Equity Income	GB00B0117B11	Medium risk
Marlborough - UK Micro Cap Growth	UK Smaller Companies	GB00B02TPH60	High risk
Premier - Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Low risk
Sarasin - Thematic Global Equity (Sterling Hedged)	Global	GB00B83F3755	Medium risk
Schroder - High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Standard Life Investments - Global Smaller Companies	Global	GB00B7KVX245	High risk
TM - Cavendish AIM	UK Smaller Companies	GB00B0JX3Z52	High risk
Unicorn - Mastertrust	Flexible Investment	GB0031269367	Low risk
Wise Funds Limited - TB Wise Multi-Asset Growth	Flexible Investment	GB0034272533	Low 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):

Name	Sector	ISIN Code	Risk
Artemis - High Income	Sterling Strategic Bond	GB00B2PLJN71	Low risk
CF - Seneca Diversified Growth	Mixed Investment 40-85% Shares	GB00B7FPW579	Low risk
CF - Seneca Diversified Income	Mixed Investment 20-60% Shares	GB00B7JTF560	Low risk
Henderson - Fixed Interest Monthly Income	Sterling Strategic Bond	GB0001920486	Low risk
JPM - Global Macro Balanced	Mixed Investment 0-35% Shares	GB00B09RGK38	Low risk
Man GLG - Strategic Bond	Sterling Strategic Bond	GB00B731HR48	Low risk
Premier - Diversified	Mixed Investment 40-85% Shares	GB00B8BJV423	Low risk
Schroder - High Yield Opportunities	Sterling High Yield	GB00B83RDY83	Low risk
Unicorn - Mastertrust	Flexible Investment	GB0031269367	Low risk
Wise Funds Limited - TB Wise Multi-Asset Growth	Flexible Investment	GB0034272533	Low risk
Aberdeen - Emerging Markets Bond	Global Emerging Markets Bond	GB00B5L9HN22	Medium risk
Artemis - US Select	North America	GB00BMMV5105	Medium risk
AXA - Framlington Monthly Income	UK Equity Income	GB00B7MMK577	Medium risk
Baillie Gifford - American	North America	GB0006061963	Medium risk
Baillie Gifford - Global Select	Global	GB00BYNK7G95	Medium risk
F&C - Property Growth and Income	Property	GB00BQWJ8687	Medium risk
Jupiter - UK Smaller Companies Acc	UK Smaller Companies	GB0004911870	Medium risk
M&G - Fund of Investment Trust Shares	Global	GB0031288680	Medium risk
Man GLG - UK Income	UK Equity Income	GB00B0117B11	Medium risk
Sarasin - Thematic Global Equity (Sterling Hedged)	Global	GB00B83F3755	Medium risk
Baillie Gifford - Emerging Markets Growth	Global Emerging Markets	GB0006020647	High risk
Baring - Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	High risk
BlackRock - European Dynamic	Europe Excluding UK	GB00B5W2QB11	High risk
CF - Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	High risk
Fidelity - China Consumer	China/Greater China	GB00B82ZSC67	High risk
Henderson - China Opportunities	China/Greater China	GB0031860934	High risk
Jupiter - European	Europe Excluding UK	GB0006664683	High risk
Marlborough - UK Micro Cap Growth	UK Smaller Companies	GB00B02TPH60	High risk
Standard Life Investments - Global Smaller Companies	Global	GB00B7KVX245	High risk
TM - Cavendish AIM	UK Smaller Companies	GB00B0JX3Z52	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 Level
Allianz - Total Return Asian Equity	Asia Pacific Excluding Japan	GB00B1FRQV53	High risk
Baillie Gifford - Greater China	China/Greater China	GB00B39RMM81	High risk
Barclays - High Income Portfolio	Mixed Investment 0-35% Shares	GB00B68F5S16	Low risk
Barclays - Income Plus Portfolio	Mixed Investment 0-35% Shares	GB00B6WYG696	Low risk
Consistent - Practical Investment	Mixed Investment 40-85% Shares	GB0006982671	Low risk
EdenTree - Amity Sterling Bond	Sterling Strategic Bond	GB00B2PF8D20	Low risk
FP - Octopus UK Micro Cap Growth	UK Smaller Companies	GB00BYQ7HN43	High risk
Legg Mason - IF ClearBridge Global Equity Income	Global Equity Income	GB00B2R8FL62	Medium risk
Liontrust - Sustainable Future Defensive Managed	Mixed Investment 20-60% Shares	GB00BMN90635	Low risk
Old Mutual - UK Mid Cap	UK All Companies	GB00B1XG8963	Medium risk
Old Mutual - UK Smaller Companies	UK Smaller Companies	GB00B1XG8B83	High risk
Smith & Williamson - European Equity	Europe Excluding UK	GB0008192840	High risk
UBS - US Growth	North America	GB00B7VHZX64	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 14% (14%)
• Alternatives 13% (11%) - includes absolute return strategies & property
• UK Corporate Fixed Interest (i.e UK bonds) 3% (3%)
• Emerging Market Fixed Interest 3% (3%)
• North American Equities 10% (10%)
• European Equities 10% (11%)
• Japanese Equities 0% (0%)
• Property 0% (0%)
• UK Equities 25% (23%)
• Cash 5% (4%)
• Asian equities 3% (3%)
• Asia Pacific Emerging equities 9% (14%)
• Other international equities 5% (4%)

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. The large spike in performance in the 80-20 Investor portfolio on the right hand side of the chart is where the portfolio rallied after the Brexit referendum while global markets plummeted.

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