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

Commentary

18 funds from August's BOTB retain their place in September's shortlist. The average return from the BOTB for the month of August was 1.4% which again is a good return when you consider that the portfolio only had 48% exposure to equities. Comparable professionally managed funds on average returned between 1.22% and 2.38% as shown in the chart below. As I pointed out previously, comparing against the Mixed Investment 40-85% Shares sector average is not a fair comparison for the BOTB given that most funds within the aforementioned sector have up to 85% exposure to equities. But it once again demonstrates that in a month when equity markets rallied strongly you would therefore have expected the sector average for the Mixed Investment 40-85% Shares sector to significantly outperform the BOTB, which it didn't.

The table below shows the top 7 performers from August's BOTB and once again there are some familiar names, which produced staggering returns. Interestingly, I actually hold five of the seven in my own £50k portfolio. The top fund performing fund from Baillie Gifford benefits from exposure to technology stocks but it is also interesting to see Asian equities performing strongly, as well as UK Smaller Companies.

Name	August % performance
Baillie Gifford Long Term Global Growth Investment	10.02
Baillie Gifford Pacific	8.26
LF Miton UK Smaller Companies	7.45
Baillie Gifford Positive Change	6.91
Allianz Total Return Asian Equity	5.13
Baillie Gifford Managed	4.49
Baillie Gifford European	4.48

At the other end of the spectrum, the monthly performance from funds with exposure to UK gilts or corporate bonds was poor with the Royal London UK Government bond fund, which I also personally hold, down over 3.3%. It's therefore not surprising that in the face of the seemingly relentless rise in equities and the short term weakness in bonds that the BOTB's equity exposure has increased to 62%, up from 48%. Most of that increased equity exposure comes via European and Asian/Chinese equities (benefiting from a weak dollar) as well as a small increase in US equities. This is the highest total equity exposure that the BOTB selection has had since before COVID-19. It will be interesting to see if this is rewarded.

UK equities continue to remain almost absent from the BOTB selection which is a reflection of the fact that the UK stock market continues to lag its peers. In fact, the FTSE 100 remains in a bear market, not helped by the weak dollar versus the pound. Any exposure to UK equities is currently via smaller companies. In terms of low-risk funds, the new BOTB has introduced some hedged global bond exposure, to counter the impact of the falling dollar, as well as targeted absolute return funds in place of gilt 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 six years ago.

Below I list this month's selection in full with the 18 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 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
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
BMO Global Total Return Bond (GBP Hedged)	Global Bonds	GB0033145268	Low risk
Fidelity China Consumer	China/Greater China	GB00B82ZSC67	Medium risk
Invesco China Equity (UK)	China/Greater China	GB00B3RW8C79	High risk
Invesco Global Focus (UK)	Global	GB00B3KJYG12	High risk
JPM Global Ex UK Bond	Global Bonds	GB0030877210	Low 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 Defensive Multi Asset	Mixed Investment 0-35% Shares	GB00B0525B66	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
Merian Global Strategic Bond	Sterling Strategic Bond	GB00B1XG7L17	Low risk
Morgan Stanley US Advantage	North America	GB00BZ4CG750	High risk
Royal London Sustainable World Trust	Mixed Investment 40-85% Shares	GB00B882H241	Medium risk
T. Rowe Price Dynamic Global Bond	Global Bonds	GB00BD0NLR34	Low risk
T. Rowe Price Global Focused Growth Equity	Global	GB00BD446774	Medium risk
Threadneedle Dynamic Real Return	Targeted Absolute Return	GB00B93TQ868	Low risk
UBS US Growth	North America	GB00B7VHZX64	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
Allianz Strategic Bond	Sterling Strategic Bond	GB00B06T9362	Low risk
BlackRock European Absolute Alpha	Targeted Absolute Return	GB00B4Y62W78	Low risk
BMO Global Total Return Bond (GBP Hedged)	Global Bonds	GB0033145268	Low risk
JPM Global Ex UK Bond	Global Bonds	GB0030877210	Low risk
Jupiter Corporate Bond	Sterling Corporate Bond	GB0002691805	Low risk
LF Canlife Global Macro Bond	Global Bonds	GB00B4LW2X97	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
T. Rowe Price Dynamic Global Bond	Global Bonds	GB00BD0NLR34	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
Fidelity China Consumer	China/Greater China	GB00B82ZSC67	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
Royal London Sustainable World Trust	Mixed Investment 40-85% Shares	GB00B882H241	Medium risk
T. Rowe Price Global Focused Growth Equity	Global	GB00BD446774	Medium risk
UBS US Growth	North America	GB00B7VHZX64	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
Invesco China Equity (UK)	China/Greater China	GB00B3RW8C79	High risk
Invesco Global Focus (UK)	Global	GB00B3KJYG12	High risk
LF Miton UK Smaller Companies	UK Smaller Companies	GB00B818N094	High risk
Morgan Stanley US Advantage	North America	GB00BZ4CG750	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
ASI AAA Bond	Sterling Corporate Bond	GB00B3W48X95	Low risk
ASI UK Government Bond	UK Gilts	GB00B6WZXS38	Low risk
AXA Sterling Strategic Bond	Sterling Strategic Bond	GB00B02Y6L20	Low risk
Barclays Sterling Bond	Sterling Strategic Bond	GB00B72Y6K08	Low risk
BNY Mellon International Bond	Global Bonds	GB0006779655	Medium risk
Franklin UK Gilt	UK Gilts	GB00BYZCTV27	Medium risk
JPM Global Macro	Targeted Absolute Return	GB00B09RGL45	Low risk
Royal London UK Government Bond	UK Gilts	GB00B881TW52	Medium risk
Schroder Global Healthcare	Global	GB00B76V7Q08	Medium risk
T. Rowe Price Global Technology Equity	Technology & Telecommunications	GB00BD446K01	High risk
Threadneedle Global Bond	Global Bonds	GB0001533685	Medium risk
Troy Asset Management Ltd Trojan Ethical	Flexible Investment	GB00BJP0XX17	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 23% (28%)
• Alternatives 7% (7%) - 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 26% (20%)
• European Equities 12% (9%)
• Japanese Equities 4% (4%)
• Property 0% (0%)
• UK Equities 5% (5%)
• Gilts 0% (9%)
• Cash 3% (4%)
• Emerging market equities 9% (3%)
• Other international equities 0% (0%)
• Asian Equities 6% (7%)
• 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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