80-20 Investor Best of the Best Selection – October 2020 Update

Commentary

21 funds from September's BOTB retain their place in October's shortlist. The average return from the BOTB for the month of September was 1.04%. Comparable professionally managed multi-asset funds on average lost -0.48% as shown in the chart below.

Despite the strong return for the BOTB it was a volatile month as the melt-up in US technology stocks threatened to unwind, before the sector eventually stabilised and rebounded. Given that the majority of September's BOTB funds make a reappearance in October's list then the risk posed by a repeat of the technology stock sell-off remains. But while investment headlines fuelled investor panic during September those investors who stayed invested were rewarded. Eventually, the rising political risks surrounding Brexit saw UK equities stumble in the second half of September, dragging down the professionally managed multi-asset funds because of their bias towards UK equities. The BOTB's minimal exposure to UK equities was beneficial. Equally the fall in the value of the pound buoyed overseas funds within the BOTB. The table below shows the top 5 performers from September's BOTB and highlights the positive impact of these trends.

A weakening pound and a strengthening dollar turbo-charged the returns from the JPM Japan fund, producing a return of 10.73%. This is especially pleasing as I hold the fund in my own portfolio. In fact, the two best performing funds from last month's BOTB reside in my portfolio.

Fund	Performance in September
JPM Japan	10.73
Baillie Gifford European	4.23
Liontrust Global Alpha	2.69
LF Canlife Global Macro Bond	2.49
Morgan Stanley US Advantage	2.19

However, at the other end of the spectrum, Allianz Strategic Bond, another fund in my own portfolio, fell 1.34% during the month. For the moment it remains in the BOTB, but for how much longer? Technology focussed funds, such as Baillie Gifford Long Term Global Growth Investment, took a breather in September as a result of the technology stock market wobble, although the fund still returned 0.91%. Obviously, this is somewhat lower than the double-digit monthly returns we've been seeing recently from the fund.

Equities still dominate the BOTB although the BOTB's equity exposure has dropped slightly from 62% to 60%. Overall the asset mix of the BOTB remains largely the same as last month with a focus on US equities over UK equities. European and Asian equities also make up a significant portion of the BOTB's asset mix. There are no longer any Chinese-only equity funds in the BOTB, instead the Chinese equity exposure now comes via the Asian equity funds (such as Baring Eastern Trust). Interestingly an emerging market fund has made the grade for the first time since the COVID pandemic. Despite gilts having a good month, the low-risk portion of the BOTB, is still made up of a mix of global bond funds, UK corporate bonds and absolute return funds.

At the foot of this article, you can see how the 80-20 Investor selection continues to outperform the professional fund managers as well as the market since its launch six years ago.

Below I list this month's selection in full with the 21 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
Allianz Strategic Bond	Sterling Strategic Bond	GB00B06T9362	Low risk
Allianz Total Return Asian Equity	Asia Pacific Excluding Japan	GB00B1FRQV53	Medium risk
Aubrey Capital Management Ltd Aubrey Global Conviction	Global	GB00B1L8XB18	High risk
AXA Framlington Global Technology	Technology & Telecommunications	GB00B4W52V57	High risk
Baillie Gifford European	Europe Excluding UK	GB0006058258	High risk
Baillie Gifford Long Term Global Growth Investment	Global	GB00BD5Z0Z54	High risk
Baillie Gifford Managed	Mixed Investment 40-85% Shares	GB0006010168	Medium risk
Baillie Gifford Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
Baillie Gifford Positive Change	Global	GB00BYVGKV59	High risk
Barings Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	High risk
BMO Global Total Return Bond (GBP Hedged)	Global Bonds	GB0033145151	Low risk
Franklin US Opportunities	North America	GB00B7KCG406	Medium risk
Invesco Global Bond (UK)	Global Bonds	GB00B3RW7B97	Low risk
Invesco Global Focus (UK)	Global	GB00B3KJYG12	High risk
JPM Japan	Japan	GB00B1XMTP77	Medium risk
Jupiter Corporate Bond	Sterling Corporate Bond	GB0002691805	Low risk
LF Blue Whale Growth	Global	GB00BD6PG563	Medium risk
LF Canlife Global Macro Bond	Global Bonds	GB00B4LW2X97	Low risk
LF Miton Cautious Multi Asset	Mixed Investment 20-60% Shares	GB00B0W1V856	Low risk
LF Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	Medium risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	High risk
Liontrust Global Alpha	Flexible Investment	GB0031190555	Medium risk
Liontrust Sustainable Future Managed Growth	Flexible Investment	GB0030029622	Medium risk
Marlborough Global Bond	Global Bonds	GB0003474730	Low risk
Merian Corporate Bond	Sterling Corporate Bond	GB00B1XG7X39	Low risk
Royal London Sustainable Managed Growth Trust	Mixed Investment 0-35% Shares	GB00B8H7XS88	Low risk
Royal London Sustainable World Trust	Mixed Investment 40-85% Shares	GB00B882H241	Medium risk
T. Rowe Price Global Focused Growth Equity	Global	GB00BD446774	Medium risk
Threadneedle Dynamic Real Return	Targeted Absolute Return	GB00B93TQ868	Low risk
Threadneedle Global Emerging Market Equity	Global Emerging Markets	GB00B10SJD63	High 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
Allianz Strategic Bond	Sterling Strategic Bond	GB00B06T9362	Low risk
BMO Global Total Return Bond (GBP Hedged)	Global Bonds	GB0033145151	Low risk
Invesco Global Bond (UK)	Global Bonds	GB00B3RW7B97	Low risk
Jupiter Corporate Bond	Sterling Corporate Bond	GB0002691805	Low risk
LF Canlife Global Macro Bond	Global Bonds	GB00B4LW2X97	Low risk
LF Miton Cautious Multi Asset	Mixed Investment 20-60% Shares	GB00B0W1V856	Low risk
Marlborough Global Bond	Global Bonds	GB0003474730	Low risk
Merian Corporate Bond	Sterling Corporate Bond	GB00B1XG7X39	Low risk
Royal London Sustainable Managed Growth Trust	Mixed Investment 0-35% Shares	GB00B8H7XS88	Low risk
Threadneedle Dynamic Real Return	Targeted Absolute Return	GB00B93TQ868	Low risk
Allianz Total Return Asian Equity	Asia Pacific Excluding Japan	GB00B1FRQV53	Medium risk
Baillie Gifford Managed	Mixed Investment 40-85% Shares	GB0006010168	Medium risk
Franklin US Opportunities	North America	GB00B7KCG406	Medium risk
JPM Japan	Japan	GB00B1XMTP77	Medium risk
LF Blue Whale Growth	Global	GB00BD6PG563	Medium risk
LF Miton European Opportunities	Europe Excluding UK	GB00BZ2K2M84	Medium risk
Liontrust Global Alpha	Flexible Investment	GB0031190555	Medium risk
Liontrust Sustainable Future Managed Growth	Flexible Investment	GB0030029622	Medium risk
Royal London Sustainable World Trust	Mixed Investment 40-85% Shares	GB00B882H241	Medium risk
T. Rowe Price Global Focused Growth Equity	Global	GB00BD446774	Medium risk
Aubrey Capital Management Ltd Aubrey Global Conviction	Global	GB00B1L8XB18	High risk
AXA Framlington Global Technology	Technology & Telecommunications	GB00B4W52V57	High risk
Baillie Gifford European	Europe Excluding UK	GB0006058258	High risk
Baillie Gifford Long Term Global Growth Investment	Global	GB00BD5Z0Z54	High risk
Baillie Gifford Pacific	Asia Pacific Excluding Japan	GB0006063233	High risk
Baillie Gifford Positive Change	Global	GB00BYVGKV59	High risk
Barings Eastern Trust	Asia Pacific Excluding Japan	GB0000799923	High risk
Invesco Global Focus (UK)	Global	GB00B3KJYG12	High risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	High risk
Threadneedle Global Emerging Market Equity	Global Emerging Markets	GB00B10SJD63	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:

Name	Sector	ISIN Code	Risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
Fidelity China Consumer	China/Greater China	GB00B82ZSC67	Medium risk
Invesco China Equity (UK)	China/Greater China	GB00B3RW8C79	High risk
JPM Global Ex UK Bond	Global Bonds	GB0030877210	Low risk
LF Miton Defensive Multi Asset	Mixed Investment 0-35% Shares	GB00B0525B66	Low risk
Merian Global Strategic Bond	Sterling Strategic Bond	GB00B1XG7L17	Low risk
Morgan Stanley US Advantage	North America	GB00BZ4CG750	High risk
T. Rowe Price Dynamic Global Bond	Global Bonds	GB00BD0NLR34	Low 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 18% (23%)
• Alternatives 7% (7%) - includes absolute return strategies & some bond exposure
• UK Corporate Fixed Interest (i.e UK bonds) 11% (5%)
• Emerging Market Fixed Income 0% (0%)
• North American Equities 26% (26%)
• European Equities 12% (12%)
• Japanese Equities 4% (4%)
• Property 0% (0%)
• UK Equities 5% (5%)
• Gilts 0% (0%)
• Cash 4% (3%)
• Emerging market equities 3% (9%)
• Other international equities 0% (0%)
• Asian Equities 10% (6%)
• Commodities and Energy 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 40-60% 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 outperformed the average managed fund and the market.

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