80-20 Investor Best of the Best Selection – September 2018 Update

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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