Commentary
As explained in the latest monthly newsletter and my latest portfolio update, the big winners in August were those funds benefiting from a macro theme of slowing global economic growth (with a possible future recession) as the ongoing US-China trade war, global geopolitical concerns and Brexit began to bite.
If you look at the performance of funds from August’s BOTB the winners were those funds with significant exposure to fixed interest such as BNY Mellon International Bond Sterling (+3.09% in August), Janus Henderson Fixed Interest Monthly Income (+2.21%) and Vanguard LifeStrategy 20% Equity (+1.75%). At the opposite end of the spectrum tech funds struggled with Neptune Global Technology falling 4.68%.
Overall, the average return for the BOTB was -0.55%, which compares favourably against the average return of -2% for funds within the Mixed Investment 40-85% Shares sector.
August ended up playing out in much the same way as May did, with defensive equity sectors and assets outperforming. Unsurprisingly those funds with these characteristics retained their place in September’s BOTB and we see an increased presence of income funds this time around. In addition, September sees the return of those funds with exposure to REITs and utilities (such as Fidelity Global Property and M&G Global Listed Infrastructure) which performed well in August and May.
Once again, gilts return to the BOTB after a brief omission following increased Brexit angst driving up demand for fixed income assets. The prospect of a no-deal Brexit also continued to push the pound lower, giving a continued boost to overseas assets. That helps explain why the BOTB now has an unusually high number (7) of global funds. Notably, the BOTB still has no exposure to emerging market equities or Asian equities.
Overall 15 funds retain their place in this month's BOTB, while the equity content drops slightly from 59% to 57%.
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 15 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 |
| Allianz Gilt Yield | UK Gilts | GB0031383283 | Low risk |
| Artemis US Select | North America | GB00BMMV5105 | High risk |
| ASI Emerging Market Debt | Global Emerging Markets Bond | GB00B8K56P77 | 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 |
| BNY Mellon International Bond | Global Bonds | GB0006779655 | Low risk |
| BNY Mellon Real Return | Targeted Absolute Return Retail | GB0001642635 | Low risk |
| Carvetian Electric & General Investment | Global | GB00B52CBS38 | Medium risk |
| Fidelity Global Enhanced Income | Global Equity Income | GB00BD1NLJ41 | Medium risk |
| Fidelity Global Property | Property Other | GB00B7K2NZ09 | High risk |
| Fidelity Multi Asset Allocator Defensive | Mixed Investment 0-35% Shares | GB00B8YQD220 | Low risk |
| First State Global Listed Infrastructure | Global | GB00B24HJL45 | Medium risk |
| Fundsmith Equity | Global | GB00B4Q5X527 | High risk |
| Janus Henderson Fixed Interest Monthly Income | Sterling Strategic Bond | GB0001920486 | Low 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 |
| LF Miton Global Infrastructure Income | Global Equity Income | GB00BD3H9L21 | Medium risk |
| M&G Global Listed Infrastructure | Global | GB00BF00R928 | Medium risk |
| Marlborough US Multi-Cap Income | North America | GB0001722882 | High risk |
| Morgan Stanley Global Brands | Global | GB0032482498 | High risk |
| Royal London Index Linked | UK Index Linked Gilts | GB00B8DDWW71 | Medium risk |
| Schroder Global Cities Real Estate | Property Other | GB00B1VPTY75 | High risk |
| TB Evenlode Global Income | Global Equity Income | GB00BF1QMV61 | 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 |
| Vanguard LifeStrategy 20% Equity | Mixed Investment 0-35% Shares | GB00B4NXY349 | Low 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 |
| Allianz Gilt Yield | UK Gilts | GB0031383283 | Low risk |
| ASI Emerging Market Debt | Global Emerging Markets Bond | GB00B8K56P77 | Low risk |
| BNY Mellon International Bond | Global Bonds | GB0006779655 | Low risk |
| BNY Mellon Real Return | Targeted Absolute Return Retail | GB0001642635 | Low risk |
| Fidelity Multi Asset Allocator Defensive | Mixed Investment 0-35% Shares | GB00B8YQD220 | Low risk |
| Janus Henderson Fixed Interest Monthly Income | Sterling Strategic Bond | GB0001920486 | Low risk |
| LF Canlife Global Macro Bond | Global Bonds | GB00B4LW2X97 | Low risk |
| Threadneedle Emerging Market Bond | Global Emerging Markets Bond | GB0002365608 | Low risk |
| Threadneedle European Bond | Global Bonds | GB0002702909 | Low risk |
| Vanguard LifeStrategy 20% Equity | Mixed Investment 0-35% Shares | GB00B4NXY349 | Low risk |
| AXA Sterling Index Linked Bond | UK Index Linked Gilts | GB00B02Y6B22 | Medium risk |
| Carvetian Electric & General Investment | Global | GB00B52CBS38 | 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 Index Linked | UK Index Linked Gilts | GB00B8DDWW71 | Medium risk |
| TB Evenlode Global Income | Global Equity Income | GB00BF1QMV61 | Medium risk |
| TB Evenlode Income | UK All Companies | GB00BD0B7D55 | Medium risk |
| Troy Asset Management Ltd Trojan Global Equity | Global | GB00B0ZJ5S47 | Medium risk |
| Artemis US Select | North America | GB00BMMV5105 | High risk |
| ASI Europe ex UK Equity | Europe Excluding UK | GB00B0LG6P37 | High risk |
| ASI Global Unconstrained Equity | Global | GB00B6915J97 | High risk |
| Fidelity Global Property | Property Other | GB00B7K2NZ09 | High risk |
| Fundsmith Equity | Global | GB00B4Q5X527 | High risk |
| Legg Mason IF Martin Currie North American | North America | GB00BVZ6VD94 | High risk |
| LF Miton European Opportunities | Europe Excluding UK | GB00BZ2K2M84 | High risk |
| Marlborough US Multi-Cap Income | North America | GB0001722882 | High risk |
| Morgan Stanley Global Brands | Global | GB0032482498 | High risk |
| Schroder Global Cities Real Estate | Property Other | GB00B1VPTY75 | 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 |
| Aberdeen Emerging Markets Bond | Global Emerging Markets Bond | GB00B5L9HN22 | Low risk |
| Aberdeen UK Equity Income | UK Equity Income | GB00B0XWN929 | Medium risk |
| AXA Framlington Global Technology | Technology & Telecommunications | GB0006598998 | High risk |
| Baillie Gifford Strategic Bond | Sterling Strategic Bond | GB0005947741 | Low risk |
| BNY Mellon Multi-Asset Balanced | Mixed Investment 40-85% Shares | GB0006778574 | Medium risk |
| Fidelity Global Dividend | Global Equity Income | GB00B7778087 | Medium risk |
| LF Blue Whale Growth | Global | GB00BD6PG563 | High risk |
| Liontrust Sustainable Future Defensive Managed | Mixed Investment 20-60% Shares | GB00BMN90635 | Low risk |
| MI Chelverton UK Equity Growth | UK All Companies | GB00BP855B75 | Medium risk |
| Neptune Global Technology | Technology & Telecommunications | GB00BYXZ5N79 | High risk |
| Royal London Sustainable Managed Growth Trust | Mixed Investment 0-35% Shares | GB00B8H7XS88 | Low risk |
| Smith & Williamson North American Equity | North America | GB0007655698 | High risk |
| Thesis Climate Assets | Mixed Investment 40-85% Shares | GB00B3K3HX15 | Medium risk |
| Threadneedle Managed Bond | Mixed Investment 0-35% Shares | GB0032010042 | Low risk |
| Troy Asset Management Ltd Trojan Global Income | Global Equity Income | GB00BD82KP33 | 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% (11%)
- Alternatives 9% (10%) - includes absolute return strategies & some bond exposure
- UK Corporate Fixed Interest (i.e UK bonds) 0% (5%)
- Emerging Market Fixed Income 6% (10%)
- North American Equities 23% (23%)
- European Equities 12% (12%)
- Japanese Equities 0% (0%)
- Property 7% (0%)
- UK Equities 8% (11%)
- Gilts 10% (0%)
- Cash 4% (5%)
- Emerging market equities 0% (0%)
- Other international equities 7% (13%)
- 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.
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