Commentary
Of the 30 funds in September's BOTB, 19 funds have retained their place in October's selection. The chart below shows the performance of the BOTB against a benchmark that is calculated using the respective sector averages for each fund in the BOTB and assuming the same asset mix. The BOTB slightly underperformed after the bond market sell-off sparked a sharp rotation back into reflation trade equity sectors, such as cyclicals and financials.
While in August every single fund within the BOTB selection finished in positive territory, the reverse was almost true for September because as explained in September's newsletter markets universally fell during the month. The table below shows the top performers within the BOTB for the month of September and it's good to see three of those are held within my own £50k portfolio. Clearly, exposure to Indian and Russian equities was a real positive as evidenced by the performance of Liontrust India and Fidelity Emerging Europe Middle East and Africa.
| Fund | September % return |
| Liontrust India | 5.14 |
| Invesco High Yield (UK) | 0.47 |
| BM Brooks Macdonald Defensive Capital | -0.35 |
| Fidelity Emerging Europe Middle East and Africa | -0.75 |
| Fidelity UK Smaller Companies | -0.86 |
At the other end of the scale, the worst-performing funds were those with exposure to property or technology shares which fell between 3.5% to 5.5%. This month the BOTB's medium risk funds have had an overhaul and the overall equity exposure has risen slightly from 67% to 68%, which is the highest for some time. The focus of the portfolio remains US, UK and European equities, while having almost no direct exposure to Asian equities (including Japan) but there is new exposure to Russian equities (owing to the rally in commodities). Growth stock exposure remains but the exposure to property equity funds has reduced after their performance moderated as bond yields burst higher. At the low-risk end of the selection, there remains a significant allocation to Targeted Absolute Return funds but a reduced exposure to bond funds, given the latter's lacklustre performance after bond prices tumbled in September. Once again there is an increased exposure to mixed-asset funds which account for the BOTB's overall increased equity exposure.
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 seven years ago.
Below I list this month's selection in full with the 19 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 |
| ASI Global Smaller Companies | Global | GB00B7KVX245 | Medium risk |
| ASI UK Smaller Companies | UK Smaller Companies | GB00B7FBH943 | Medium risk |
| AXA Framlington American Growth | North America | GB00B5LXGG05 | Medium risk |
| Baillie Gifford Diversified Growth | Targeted Absolute Return | GB00B3FD0Z91 | Low risk |
| Baillie Gifford Multi Asset Growth | Targeted Absolute Return | GB00BY9C5Y31 | Low risk |
| BM Brooks Macdonald Defensive Capital | Targeted Absolute Return | GB00B61MR835 | Low risk |
| CFP Castlefield Real Return | Targeted Absolute Return | GB00B12V1482 | Low risk |
| Fidelity Emerging Europe Middle East and Africa | Specialist | GB00B87Z7808 | High risk |
| Fidelity UK Smaller Companies | UK Smaller Companies | GB00B7VNMB18 | High risk |
| FTF Franklin UK Smaller Companies | UK Smaller Companies | GB00B7FFF708 | High risk |
| Invesco High Yield (UK) | Sterling High Yield | GB00B3RW7649 | Low risk |
| Invesco Monthly Income Plus (UK) | Sterling Strategic Bond | GB00B1W7J204 | Low risk |
| Jupiter European | Europe Excluding UK | GB0006664683 | Medium risk |
| Liontrust Global Technology | Technology & Telecommunication | GB00BYXZ5N79 | High risk |
| Liontrust India | India/Indian Subcontinent | GB00B1L6DV51 | High risk |
| Liontrust Russia | Specialist | GB00B86WB793 | High risk |
| Liontrust Sustainable Future Defensive Managed | Mixed Investment 20-60% Shares | GB00BMN90635 | Low risk |
| Marlborough European Multi-Cap | Europe Excluding UK | GB0001719730 | High risk |
| Marlborough UK Micro Cap Growth | UK Smaller Companies | GB00B02TPH60 | High risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | Medium risk |
| Ninety One American Franchise | North America | GB00B1XFJ342 | High risk |
| Premier Miton Diversified Cautious Growth | Mixed Investment 20-60% Shares | GB00BHNZ2P92 | Low risk |
| Royal London Global Sustainable Equity | Global | GB00BL6V0581 | Medium risk |
| Royal London Sustainable Managed Growth Trust | Mixed Investment 0-35% Shares | GB00B8H7XS88 | Low risk |
| Schroder Global Cities Real Estate | Property Other | GB00B1VPTY75 | Medium risk |
| SVS Sanlam North American Equity | North America | GB0007655698 | Medium risk |
| T. Rowe Price Global Technology Equity | Technology & Telecommunication | GB00BD446K01 | High risk |
| Troy Asset Management Ltd Trojan Global Equity | Global | GB00B0ZJ5S47 | Medium risk |
| VT Chelsea Managed Monthly Income | Mixed Investment 20-60% Shares | GB00BF0NMS52 | Low risk |
| VT Downing Monthly Income | UK Equity Income | GB00B61JRG28 | 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 |
| Baillie Gifford Diversified Growth | Targeted Absolute Return | GB00B3FD0Z91 | Low risk |
| Baillie Gifford Multi Asset Growth | Targeted Absolute Return | GB00BY9C5Y31 | Low risk |
| BM Brooks Macdonald Defensive Capital | Targeted Absolute Return | GB00B61MR835 | Low risk |
| CFP Castlefield Real Return | Targeted Absolute Return | GB00B12V1482 | Low risk |
| Invesco High Yield (UK) | Sterling High Yield | GB00B3RW7649 | Low risk |
| Invesco Monthly Income Plus (UK) | Sterling Strategic Bond | GB00B1W7J204 | Low risk |
| Liontrust Sustainable Future Defensive Managed | Mixed Investment 20-60% Shares | GB00BMN90635 | Low risk |
| Premier Miton Diversified Cautious Growth | Mixed Investment 20-60% Shares | GB00BHNZ2P92 | Low risk |
| Royal London Sustainable Managed Growth Trust | Mixed Investment 0-35% Shares | GB00B8H7XS88 | Low risk |
| VT Chelsea Managed Monthly Income | Mixed Investment 20-60% Shares | GB00BF0NMS52 | Low risk |
| ASI Global Smaller Companies | Global | GB00B7KVX245 | Medium risk |
| ASI UK Smaller Companies | UK Smaller Companies | GB00B7FBH943 | Medium risk |
| AXA Framlington American Growth | North America | GB00B5LXGG05 | Medium risk |
| Jupiter European | Europe Excluding UK | GB0006664683 | Medium risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | Medium risk |
| Royal London Global Sustainable Equity | Global | GB00BL6V0581 | Medium risk |
| Schroder Global Cities Real Estate | Property Other | GB00B1VPTY75 | Medium risk |
| SVS Sanlam North American Equity | North America | GB0007655698 | Medium risk |
| Troy Asset Management Ltd Trojan Global Equity | Global | GB00B0ZJ5S47 | Medium risk |
| VT Downing Monthly Income | UK Equity Income | GB00B61JRG28 | Medium risk |
| Fidelity Emerging Europe Middle East and Africa | Specialist | GB00B87Z7808 | High risk |
| Fidelity UK Smaller Companies | UK Smaller Companies | GB00B7VNMB18 | High risk |
| FTF Franklin UK Smaller Companies | UK Smaller Companies | GB00B7FFF708 | High risk |
| Liontrust Global Technology | Technology & Telecommunication | GB00BYXZ5N79 | High risk |
| Liontrust India | India/Indian Subcontinent | GB00B1L6DV51 | High risk |
| Liontrust Russia | Specialist | GB00B86WB793 | High risk |
| Marlborough European Multi-Cap | Europe Excluding UK | GB0001719730 | High risk |
| Marlborough UK Micro Cap Growth | UK Smaller Companies | GB00B02TPH60 | High risk |
| Ninety One American Franchise | North America | GB00B1XFJ342 | High risk |
| T. Rowe Price Global Technology Equity | Technology & Telecommunication | GB00BD446K01 | 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 |
| Allianz Continental European | Europe Excluding UK | GB00B3Q8YX99 | High risk |
| ASI UK Real Estate Share | Property Other | GB00B0XWNM59 | High risk |
| AXA Global Distribution | Mixed Investment 20-60% Shares | GB0008309063 | Low risk |
| BMO North American Equity | North America | GB0030281405 | Medium risk |
| Fidelity Global Property | Property Other | GB00B7K2NZ09 | Medium risk |
| Liontrust Sustainable Future Managed | Mixed Investment 40-85% Shares | GB0030030398 | Medium risk |
| Marlborough Multi-Cap Growth | UK All Companies | GB0005662787 | Medium risk |
| Royal London Global Index Linked | Global Bonds | GB00B772RM82 | Low risk |
| Royal London Sustainable World Trust | Mixed Investment 40-85% Shares | GB00B882H241 | Medium risk |
| Schroder UK Dynamic Smaller Companies | UK Smaller Companies | GB0007220360 | High risk |
| TB Saracen Global Income & Growth | Global Equity Income | GB00B5B35X02 | 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 9% (10%)
- Alternatives 18% (19%) - includes absolute return strategies & some bond exposure
- UK Corporate Fixed Interest (i.e UK bonds) 5% (4%)
- Emerging Market Fixed Income 0% (0%)
- North American Equities 20% (17%)
- European Equities 6% (7%)
- Chinese Equities 0% (0%)
- Japanese Equities 0% (0%)
- Property 5% (8%)
- UK Equities 19% (21%)
- Gilts 0% (0%)
- Cash 0% (0%)
- Asian / Emerging market equities 7% (3%)
- Other international equities 11% (11%)
- 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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