80-20 Investor Best of the Best Selection – October 2019 Update

Commentary

As explained in this month’s newsletter the market narrative was turned on its head at the start of September. Assets and equity sectors that performed well in August struggled in the first two weeks of September.

For UK investors the biggest influence on fund and portfolio returns was the strengthening of the pound. Over the course of the month the pound rallied more than 3% against the US dollar, a result of the Brexit saga and dollar strength, hampering returns of overseas holdings as well as index-linked gilt funds.

Unsurprisingly funds with significant US equity exposure struggled (i.e Artemis US Select and Fundsmith Equity fell over 3%). Meanwhile, after a shaky start to September, when defensive sectors lagged, infrastructure funds and REITs (i.e. Fidelity Global Property) rebounded to finish once again among last months’ BOTB top performers (up between 0.6%and 0.9%). Despite this, overall the BOTB was down an average of 1.23% for the month of September versus +0.99% for the average Mixed 40-85% Shares sector.

To give this some context, during September the BOTB simply gave back the outperformance it achieved during August when the market was pricing in a recession.

As we enter October the market narrative has once again begun pricing in the possibility of a global recession, helping to boost bonds and defensives in the short term. This narrative could just as easily turn on its head again, as we’ve seen it do a number of times in the last few months and particularly at the start of September.

October’s BOTB sees a number of changes. The low-risk funds are now almost exclusively exposed to UK assets, in particular bonds, which is a reflection of the increased volatility and risk that currency exposure brings. You will notice that a number of funds with overseas exposure (global bonds and equities) have moved up risk categories which reflects the impact of the gyrations in the pound. TB Evenlode Global Income fund is a case in point, which is now classed as high risk.

While there is less property exposure in October’s BOTB there is an increase in exposure to utilities through funds such as VT Gravis Clean Energy Income. Bear in mind that the 80-20 Investor algorithm looks at medium-term trends so the BOTB still maintains some exposure to defensive sectors. The BOTB still has no exposure to emerging market equities but has now got a small exposure to Japanese equities, which received a huge boost from a weakening yen versus the dollar during September.

Overall 13 funds retain their place in this month's BOTB, while the equity content dropped once again, this time from 57% to 52%.

At the foot of this article you can see how the 80-20 Investor selection has outperformed the professional fund managers as well as the market since its launch five years ago.

Below I list this month's selection in full with the 13 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
Artemis US Select	North America	GB00BMMV5105	High risk
ASI Emerging Market Debt	Global Emerging Markets Bond	GB00B8K56P77	Medium risk
ASI Ethical Corporate Bond	Sterling Corporate Bond	GB00B708KW45	Low risk
Baillie Gifford High Yield Bond	Sterling High Yield	GB0030816713	Low risk
Baillie Gifford Investment Grade Bond	Sterling Corporate Bond	GB0030816481	Low risk
BNY Mellon International Bond	Global Bonds	GB0006779655	Medium risk
BNY Mellon Real Return	Targeted Absolute Return	GB0001642635	Low risk
Close Growth Portfolio	Flexible Investment	GB00B7F1W221	Medium risk
Fidelity Global Dividend	Global Equity Income	GB00B7778087	Medium risk
Fidelity Global Enhanced Income	Global Equity Income	GB00BD1NLJ41	Medium risk
Fidelity Global Focus	Global	GB00B3RDH349	High risk
First State Global Listed Infrastructure	Global	GB00B24HJL45	Medium risk
Janus Henderson Fixed Interest Monthly Income	Sterling Strategic Bond	GB0001920486	Low risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	High risk
Jupiter Merlin Conservative Portfolio	Mixed Investment 0-35% Shares	GB00B8GDMB34	Low risk
Legg Mason IF ClearBridge US Equity Income	North America	GB00B3TTBW75	High risk
LF Miton Global Infrastructure Income	Global Equity Income	GB00BD3H9L21	Medium risk
M&G Global Listed Infrastructure	Global	GB00BF00R928	Medium risk
M&G Global Themes	Global	GB00B7FW1L71	High risk
Marlborough US Multi-Cap Income	North America	GB0001722882	High risk
Royal London Sustainable Leaders Trust	UK All Companies	GB00B7V23Z99	Medium risk
Royal London Sustainable Managed Growth Trust	Mixed Investment 0-35% Shares	GB00B8H7XS88	Low risk
Sarasin Responsible Global Equity	Global	GB00B8369M57	High risk
Schroder All Maturities Corporate Bond	Sterling Corporate Bond	GB00B4V0R051	Low risk
Schroder Global Cities Real Estate	Property Other	GB00B1VPTY75	High risk
Schroder Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
TB Evenlode Global Income	Global Equity Income	GB00BF1QMV61	High risk
Vanguard LifeStrategy 20% Equity	Mixed Investment 0-35% Shares	GB00B4NXY349	Low risk
Vanguard UK Inflation-Linked Gilt Index	UK Index Linked Gilts	GB00B45Q9038	High risk
VT Gravis Clean Energy Income	Global	GB00BFN4H792	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):

Name	Sector	ISIN Code	Risk
ASI Ethical Corporate Bond	Sterling Corporate Bond	GB00B708KW45	Low risk
Baillie Gifford High Yield Bond	Sterling High Yield	GB0030816713	Low risk
Baillie Gifford Investment Grade Bond	Sterling Corporate Bond	GB0030816481	Low risk
BNY Mellon Real Return	Targeted Absolute Return	GB0001642635	Low risk
Janus Henderson Fixed Interest Monthly Income	Sterling Strategic Bond	GB0001920486	Low risk
Jupiter Merlin Conservative Portfolio	Mixed Investment 0-35% Shares	GB00B8GDMB34	Low risk
Royal London Sustainable Managed Growth Trust	Mixed Investment 0-35% Shares	GB00B8H7XS88	Low risk
Schroder All Maturities Corporate Bond	Sterling Corporate Bond	GB00B4V0R051	Low risk
Schroder Sterling Corporate Bond	Sterling Corporate Bond	GB0009379370	Low risk
Vanguard LifeStrategy 20% Equity	Mixed Investment 0-35% Shares	GB00B4NXY349	Low risk
ASI Emerging Market Debt	Global Emerging Markets Bond	GB00B8K56P77	Medium risk
BNY Mellon International Bond	Global Bonds	GB0006779655	Medium risk
Close Growth Portfolio	Flexible Investment	GB00B7F1W221	Medium risk
Fidelity Global Dividend	Global Equity Income	GB00B7778087	Medium risk
Fidelity Global Enhanced Income	Global Equity Income	GB00BD1NLJ41	Medium risk
First State Global Listed Infrastructure	Global	GB00B24HJL45	Medium risk
LF Miton Global Infrastructure Income	Global Equity Income	GB00BD3H9L21	Medium risk
M&G Global Listed Infrastructure	Global	GB00BF00R928	Medium risk
Royal London Sustainable Leaders Trust	UK All Companies	GB00B7V23Z99	Medium risk
VT Gravis Clean Energy Income	Global	GB00BFN4H792	Medium risk
Artemis US Select	North America	GB00BMMV5105	High risk
Fidelity Global Focus	Global	GB00B3RDH349	High risk
Jupiter Japan Income	Japan	GB00B0HZTZ55	High risk
Legg Mason IF ClearBridge US Equity Income	North America	GB00B3TTBW75	High risk
M&G Global Themes	Global	GB00B7FW1L71	High risk
Marlborough US Multi-Cap Income	North America	GB0001722882	High risk
Sarasin Responsible Global Equity	Global	GB00B8369M57	High risk
Schroder Global Cities Real Estate	Property Other	GB00B1VPTY75	High risk
TB Evenlode Global Income	Global Equity Income	GB00BF1QMV61	High risk
Vanguard UK Inflation-Linked Gilt Index	UK Index Linked Gilts	GB00B45Q9038	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
Allianz Gilt Yield	UK Gilts	GB0031383283	Low risk
ASI Europe ex UK Equity	Europe Excluding UK	GB00B0LG6P37	High risk
ASI Global Unconstrained Equity	Global	GB00B6915J97	High risk
AXA Sterling Index Linked Bond	UK Index Linked Gilts	GB00B02Y6B22	Medium risk
Carvetian Electric & General Investment	Global	GB00B52CBS38	Medium risk
Fidelity Global Property	Property Other	GB00B7K2NZ09	High risk
Fidelity Multi Asset Allocator Defensive	Mixed Investment 0-35% Shares	GB00B8YQD220	Low risk
Fundsmith Equity	Global	GB00B4Q5X527	High risk
Legg Mason IF Martin Currie North American	North America	GB00BVZ6VD94	High risk
LF Canlife Global Macro Bond	Global Bonds	GB00B4LW2X97	Low risk
LF Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	High risk
Morgan Stanley Global Brands	Global	GB0032482498	High risk
Royal London Index Linked	UK Index Linked Gilts	GB00B8DDWW71	Medium risk
TB Evenlode Income	UK All Companies	GB00BD0B7D55	Medium risk
Threadneedle Emerging Market Bond	Global Emerging Markets Bond	GB0002365608	Low risk
Threadneedle European Bond	Global Bonds	GB0002702909	Low risk
Troy Asset Management Ltd Trojan Global Equity	Global	GB00B0ZJ5S47	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 14% (9%) - includes absolute return strategies & some bond exposure
• UK Corporate Fixed Interest (i.e UK bonds) 12% (0%)
• Emerging Market Fixed Income 4% (6%)
• North American Equities 22% (23%)
• European Equities 8% (12%)
• Japanese Equities 5% (0%)
• Property 4% (7%)
• UK Equities 9% (8%)
• Gilts 4% (10%)
• Cash 0% (4%)
• Emerging market equities 0% (0%)
• Other international equities 4% (7%)
• Asian Equities 0% (0%)

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 a FTSE 100 tracker fund (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.

All performance figures are net of fund charges. The material in any email, the MoneytotheMasses.com website, associated pages / channels / accounts and any other correspondence are for general information only and do not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation. See full Terms & Conditions, Privacy Policy and Disclaimer.

Neither MoneytotheMasses.com or 80-20 Investor nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Funds invest in shares, bonds, and other financial instruments and are by their nature speculative and can be volatile. You should never invest more than you can safely afford to lose. The value of your investment can go down as well as up so you may get back less than you originally invested. Tax rules can change and benefits depend on individual circumstances.
Information provided by MoneytotheMasses.com or 80-20 Investor is for general information only and not intended to be relied upon by readers in making (or not making) specific investment decisions.
Appropriate independent advice should be obtained before making any such decisions. Leadenhall Learning (owner of MoneytotheMasses.com or 80-20 Investor) and its staff do not accept liability for any loss suffered by readers as a result of any such decisions.
The tables and graphs are derived from data supplied by Trustnet. All Rights Reserved.