Commentary
As discussed in September's monthly newsletter, August was another good month for investors and it brought to a close an unseasonably strong summer for developed world equities. However Chinese equities and Asian equities continued to lag and the BOTB selection benefited from their absence. The BOTB selection finished up 2.57% (assuming an equal investment across all the funds in it). There were some incredible returns during the month, as this table of top performers shows:
| Name | Total return in August |
| AXA Framlington Global Technology | 9.24 |
| Baillie Gifford Positive Change | 8.5 |
| AXA Framlington American Growth | 8.36 |
| Neptune Global Technology | 7.94 |
| Standard Life Investments Global Smaller Companies | 5.5 |
| Janus Henderson US Growth | 4.79 |
| Liontrust Sustainable Future Absolute Growth | 4.7 |
| L&G Global Health & Pharmaceuticals Index | 4.29 |
At the opposite end of the spectrum, there were only three funds that didn't make a profit, one of them being Premier UK Growth which fell 1.49% (versus 4% for the FTSE 100). This pattern reflects what can be seen in this month's 80-20 Investor heatmap.
The divergence between US stocks, global stocks and other assets continued and the cause remains the escalating trade war between the US and China. In contrast to July, European equities had a weaker month as growth stocks excelled. European equities tend to have a slight value bias. UK equities had a poor month as the dollar weakened against the pound. As such it is not surprising that UK equities are now the third largest constituent of the BOTB, rather than the biggest as they have been previously.
It is interesting to see that despite the stellar performance AXA Framlington American has dropped out of the BOTB. I hold this fund in my own portfolio. The reason for the omission is because of the rise in the investment risk associated with the fund relative to its peers. So it is still a good fund but was screened out by the 80-20 Investor algorithm based on risk. I will obviously review its inclusion in my own portfolio in due course.
At the lower end of the risk spectrum, the property exposure has fallen along with the exposure to global bonds. As explained in September's monthly newsletter, there's little to get excited about in the bond market at the moment. Consequently, the BOTB has an increased exposure to absolute return strategies and cash.
Given the strong performance in August it is perhaps unsurprising that 19 funds have regained their position in this month's BOTB. Of those funds that are new many are familiar from past months' BOTB selections while many of the funds that lost their place in this month's BOTB remain in their respective BFBS shortlists.
In terms of direct equity exposure, the BOTB's exposure has risen to 65%, up from 62% last month. 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 four 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.
September'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 European Equity | Europe Excluding UK | GB00B0LG6P37 | Medium risk |
| Allianz Continental European | Europe Excluding UK | GB00B3Q8YX99 | Medium risk |
| AXA Framlington Global Technology | Technology & Telecommunications | GB00B4W52V57 | High risk |
| AXA Global Distribution | Mixed Investment 20-60% Shares | GB0008309063 | Low risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| BlackRock European Absolute Alpha | Targeted Absolute Return | GB00B4Y62W78 | Low risk |
| Fidelity Global Dividend | Global Equity Income | GB00B7GJPN73 | Medium risk |
| Fidelity Global Property | Property | GB00B7K2NZ09 | High risk |
| iShares UK Gilts All Stocks Index (UK) | UK Gilts | GB00B83HGR24 | Low risk |
| Janus Henderson US Growth | North America | GB0032438466 | High risk |
| JPM Global High Yield Bond | Sterling High Yield | GB0008350976 | Low risk |
| JPM Japan | Japan | GB0030879471 | High risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | Medium risk |
| L&G Global Health & Pharmaceuticals Index Trust | Global | GB00B0CNH387 | High risk |
| LF Miton European Opportunities | Europe Excluding UK | GB00BZ2K2M84 | High risk |
| Liontrust Sustainable Future Absolute Growth | Flexible Investment | GB0030029622 | Medium risk |
| Liontrust Sustainable Future Defensive Managed | Mixed Investment 20-60% Shares | GB00BMN90635 | Low risk |
| Liontrust Sustainable Future UK Growth | UK All Companies | GB0030028764 | Medium risk |
| McInroy & Wood Smaller Companies | Global | GB00B8NC4D98 | Medium risk |
| Neptune Global Technology | Technology & Telecommunications | GB00BYXZ5N79 | High risk |
| Neptune US Opportunities | North America | GB00B7K9LQ88 | High risk |
| Newton Real Return | Targeted Absolute Return | GB0001642635 | Low risk |
| Royal London European Growth Trust | Europe Excluding UK | GB0009537407 | Medium risk |
| Royal London Sustainable Diversified Trust | Mixed Investment 20-60% Shares | GB00B844WJ68 | Low 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 |
| S&W Saltus Wealth | Targeted Absolute Return | GB00B6RLZP73 | Low risk |
| Standard Life Investments Global Smaller Companies | Global | GB00B7KVX245 | High risk |
| Standard Life Investments Higher Income | Sterling High Yield | GB00B79RR984 | Low risk |
| VT Castlebay UK Equity | UK All Companies | GB00BV0LF607 | Medium risk |
September's Best of the Best Selection - (grouped by risk)
Here is September'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 |
| AXA Global Distribution | Mixed Investment 20-60% Shares | GB0008309063 | Low risk |
| BlackRock European Absolute Alpha | Targeted Absolute Return | GB00B4Y62W78 | Low risk |
| iShares UK Gilts All Stocks Index (UK) | UK Gilts | GB00B83HGR24 | Low risk |
| JPM Global High Yield Bond | Sterling High Yield | GB0008350976 | Low risk |
| Liontrust Sustainable Future Defensive Managed | Mixed Investment 20-60% Shares | GB00BMN90635 | Low risk |
| Newton Real Return | Targeted Absolute Return | GB0001642635 | Low risk |
| Royal London Sustainable Diversified Trust | Mixed Investment 20-60% Shares | GB00B844WJ68 | Low risk |
| Royal London Sustainable Managed Growth Trust | Mixed Investment 0-35% Shares | GB00B8H7XS88 | Low risk |
| S&W Saltus Wealth | Targeted Absolute Return | GB00B6RLZP73 | Low risk |
| Standard Life Investments Higher Income | Sterling High Yield | GB00B79RR984 | Low risk |
| Aberdeen European Equity | Europe Excluding UK | GB00B0LG6P37 | Medium risk |
| Allianz Continental European | Europe Excluding UK | GB00B3Q8YX99 | Medium risk |
| Fidelity Global Dividend | Global Equity Income | GB00B7GJPN73 | Medium risk |
| Jupiter UK Smaller Companies | UK Smaller Companies | GB0004911870 | Medium risk |
| Liontrust Sustainable Future Absolute Growth | Flexible Investment | GB0030029622 | Medium risk |
| Liontrust Sustainable Future UK Growth | UK All Companies | GB0030028764 | Medium risk |
| McInroy & Wood Smaller Companies | Global | GB00B8NC4D98 | Medium risk |
| Royal London European Growth Trust | Europe Excluding UK | GB0009537407 | Medium risk |
| Royal London Sustainable Leaders Trust | UK All Companies | GB00B7V23Z99 | Medium risk |
| VT Castlebay UK Equity | UK All Companies | GB00BV0LF607 | Medium risk |
| AXA Framlington Global Technology | Technology & Telecommunications | GB00B4W52V57 | High risk |
| Baillie Gifford Positive Change | Global | GB00BYVGKV59 | High risk |
| Fidelity Global Property | Property | GB00B7K2NZ09 | High risk |
| Janus Henderson US Growth | North America | GB0032438466 | High risk |
| JPM Japan | Japan | GB0030879471 | High risk |
| L&G Global Health & Pharmaceuticals Index Trust | Global | GB00B0CNH387 | High risk |
| LF Miton European Opportunities | Europe Excluding UK | GB00BZ2K2M84 | High risk |
| Neptune Global Technology | Technology & Telecommunications | GB00BYXZ5N79 | High risk |
| Neptune US Opportunities | North America | GB00B7K9LQ88 | High risk |
| Standard Life Investments Global Smaller Companies | Global | GB00B7KVX245 | 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 |
| AXA Framlington American Growth | North America | GB00B5LXGG05 | High risk |
| AXA Sterling Credit Short Duration Bond | Sterling Corporate Bond | GB00B5VLK178 | Low risk |
| Barclays Sterling Bond | Sterling Strategic Bond | GB00B72Y6K08 | Low risk |
| CFP SDL UK Buffettology | UK All Companies | GB00B3QQFJ66 | Medium risk |
| Fidelity Short Dated Corporate Bond | Sterling Corporate Bond | GB00BDCG0G22 | Low risk |
| First State Global Property Securities | Property | GB00B1F76L55 | High risk |
| Premier UK Growth | UK All Companies | GB0031639221 | Medium risk |
| S&W Saltus Multi Asset Class | Targeted Absolute Return | GB00B43T2834 | Low risk |
| Standard Life Investments AAA Income | Sterling Corporate Bond | GB00B3W48X95 | Low risk |
| Threadneedle UK Equity Alpha Income | UK Equity Income | GB00B12WJY78 | High risk |
| VT Tcam Income Portfolio | Mixed Investment 0-35% Shares | GB00B9L4H242 | Low 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 6% (13%)
- Alternatives 14% (14%) - includes absolute return strategies & property
- UK Corporate Fixed Interest (i.e UK bonds) 8% (8%)
- Emerging Market Fixed Interest 0% (0%)
- North American Equities 21% (19%)
- European Equities 19% (13%)
- Japanese Equities 4% (4%)
- Property 3% (7%)
- UK Equities 18% (19%)
- UK Gilts 3% (3%)
- Cash 4% (0%)
- Asian equities 0% (0%)
- Asia Pacific Emerging equities 0% (0%)
- Other international 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 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.
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