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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