Damien’s April 2021 portfolio review – Time for a change

The background to my portfolio

Back in March 2015 I decided to invest £50,000 of my own money using 80-20 Investor. The purpose was twofold, firstly to show how you can use 80-20 Investor to invest and outperform the market with only a few minutes effort every now and then. Secondly, no other investment commentator, journalist or research provider invests their own money for fear of failing. This is a sorry state of affairs and is precisely why I committed to openly running my own portfolio for 80-20 Investor members to see.

Since then I have periodically changed my portfolio using the fund suggestions provided by the 80-20 Investor algorithm and associated research. I always disclose the changes at the time they are made.

Performance update

As is usual in my portfolio reviews, the chart below shows how my portfolio has outperformed since I started the challenge in March 2015, which is six years ago. The green line is the performance of my portfolio while the red line is the benchmark showing the average return achieved by professional fund managers given the same asset mix. To accurately calculate this I have used the average return for each sector in which my portfolio invested. The blue line shows what the average multi-asset fund with comparable equity content achieved. In other words, the red line would show the extra performance added by just the asset mix of my portfolio (where I was invested i.e European equities etc) over picking a typical multi-asset fund (the blue line). While the green line (which is my actual performance) shows the impact of being in the right funds at the right time, as identified by the 80-20 Investor algorithm.

The chart below shows the performance of my portfolio versus its benchmarks during March. As you can see March was a better month for my portfolio compared to February after technology stocks rebounded from their March low. My portfolio lost a bit of ground against its benchmarks during March but, despite this, it remains well ahead of its benchmarks over the long term, as shown above.

The table below shows the performance of the individual funds within my portfolio since my last portfolio review in March. Fidelity UK Smaller Companies, Sarasin Global Dividend and Premier Miton Diversified Growth were among the best performers for the second month in a row.

Fund	Performance % since last review
Fidelity UK Smaller Companies	4.81
Sarasin Global Dividend	4.65
Baillie Gifford Positive Change	3.71
Premier Miton Diversified Growth	2.68
Baillie Gifford Long Term Global Growth Investment	2.42
VT Gravis Clean Energy Income	2.34
iShares Physical Gold ETC	2.24
T. Rowe Price Global Focused Growth Equity	1.7
ES R&M UK Recovery	1.26
Invesco Global Emerging Markets (UK)	1.21
Fidelity Global High Yield	0.45
ASI Strategic Bond	0.18
Allianz Total Return Asian Equity	-0.23
JPM Natural Resources	-2.49

The table above also demonstrates how the Baillie Gifford funds, with their growth stock focus staged something of a rebound. However, they still have some ground to make up since mid-February when bond yields and inflation expectations started increasing, as shown in the table below. The bottom six performers in the table illustrate how the bond market weakness continues to hit funds that invest in assets sensitive to rising bond yields. Those assets include technology and growth stocks as well as alternative energy stocks and gold.

Fund	% return since 10th Feb 2021
Fidelity UK Smaller Companies	10.59
ES R&M UK Recovery	7.8
JPM Natural Resources	4.03
Sarasin Global Dividend	3.33
Premier Miton Diversified Growth	1.75
Fidelity Global High Yield	-0.25
ASI Strategic Bond	-0.81
T. Rowe Price Global Focused Growth Equity	-3.61
Invesco Global Emerging Markets (UK)	-4.38
VT Gravis Clean Energy Income	-4.65
iShares Physical Gold ETC	-6.18
Baillie Gifford Positive Change	-9.84
Allianz Total Return Asian Equity	-10.06
Baillie Gifford Long Term Global Growth Investment	-14.59

As is routine in my portfolio reviews, the table below shows which funds within my portfolio are in the current BOTB or BFBS tables and which are not. Those funds in green are still in the BOTB while those in orange are not in the BOTB but remain in the BFBS list. Meanwhile, any funds in red have dropped out of both shortlists.

Name	Allocation % (rounded)	Risk	Sector	ISIN Code
Allianz Total Return Asian Equity	5.5	Medium	Asia Pacific Excluding Japan	GB00B1FRQV53
ASI Strategic Bond	15.5	Low	Sterling Strategic Bond	GB00BWK27X12
Baillie Gifford Long Term Global Growth Investment	2.5	High	Global	GB00BD5Z0Z54
Baillie Gifford Positive Change	3.5	High	Global	GB00BYVGKV59
ES R&M UK Recovery	6	Medium	UK All Companies	GB00B614J053
Fidelity Global High Yield	8	Low	Sterling High Yield	GB00B7K7SQ18
Fidelity UK Smaller Companies	8	High	UK Smaller Companies	GB00B7VNMB18
Invesco Global Emerging Markets (UK)	10.5	High	Global Emerging Markets	GB00B3RW7S64
iShares Physical Gold ETC	4	Medium	Commodity & Energy ETF	IE00B4ND3602
JPM Natural Resources	5.5	High	Specialist	GB0031835118
Premier Diversified Growth	10	Medium	Mixed Investment 40-85% Shares	GB00B8BJV423
Sarasin Global Dividend	8	Medium	Global Equity Income	GB00BGDF8F44
T. Rowe Price Global Focused Growth Equity	7.5	Medium	Global	GB00BD446774
VT Gravis Clean Energy Income	5.5	Medium	Global	GB00BFN4H792

The so-called reflation trade has proved more than just a market blip, after driving investment markets for almost two months. Of course that is not to say that we won't see the reflation trade unwind, especially if bond yields fall or the Covid-19 pandemic spirals out of control once again or the economic rebound in developed markets starts to falter. For now, at least the reflation trade is what is driving markets and favours value funds over growth funds.

If you look at the table above you can see that 6 funds have now dropped out of the BOTB and BFBS tables (and are coloured red). Given the portfolio's recent underperformance and the seismic change in the BOTB constituents, it is time to make some wholesale changes to the portfolio, shifting its core from growth towards value/cyclical assets.

Looking at individual funds in red, Sarasin Global Dividend is an interesting member of my portfolio. As the earlier tables show, it has been one of the top-performing funds within my portfolio since the reflation trade took over. Perhaps this is not surprising as it was added to the portfolio as part of the 'vaccine trade', which ultimately morphed into the reflation trade, back in November. The fund is value-focused which is why it has performed so well recently.

The table below shows how the fund has outperformed its sector average since the reflation trade started back in February. Don't forget that the Global Equity Income sector has been one of the best performing sectors in the reflation trade as identified in my research article "Funds for the reflation trade".

As such, I plan to keep the fund within my portfolio for the time being as it remains a beneficiary of current market conditions but in doing so I also minimise the number of fund changes I make to my portfolio this month. As long term 80-20 Investor members know, I try to minimise the number of fund switches within my portfolio in order to ensure more time is spent in the market.

However, I plan to remove the other funds within my portfolio that have dropped out of the 80-20 Investor tables (i.e coloured red in the table above). The Baillie Gifford funds have struggled due to their exposure to technology stocks and other growth plays. The same could be said, albeit to a lesser degree, of T. Rowe Price Global Focused Growth Equity. But as the charts below show, both Baillie Gifford funds have still been incredibly profitable investments for me, outperforming their peer group average since I've held them

Meanwhile, VT Gravis Clean Energy Income had been a beneficiary of Biden's push for a green economic recovery but rising bond yields have hit the alternative energy sector, hampering the fund's performance. The chart below shows the performance of VT Gravis Clean Energy Income since I've held it. The removal of these funds ultimately completes my steady dripping out of VT Clean Energy Income and both Baillie Gifford funds.

The performance of Allianz Total Return Asian Equity has been disappointing of late, due to its significant exposure to Chinese equities. The chart below shows the performance of the fund since I first held it.

Chinese equities had been one of the best performing markets since the pandemic hit Western economies. However, it has become something of a disappointment, lagging other global equity markets since mid-February. For that reason, I am removing the fund from my portfolio, while at the same time reducing my exposure to Invesco Global Emerging Markets (UK), which, although still in the BOTB, has significant exposure to Chinese technology stocks.

Below I list each of my fund switches with a brief explanation.

Fund switches

Fund switch 1

100% out of Allianz Total Return Asian Equity and 100% into Artemis SmartGARP Global Equity - this switch reduces my portfolio's exposure to Chinese equities while at the same time increasing its global value/cyclical exposure with the Artemis fund's most significant sector exposure being financials.

Fund switch 2

100% out of Baillie Gifford Long Term Global Growth Investment and 100% into Jupiter Income Trust - continuing the trend I started in November of reducing my exposure to technology plays in favour of more value opportunities, again in the UK. This increases my portfolio's UK equity exposure to be more in line with that of the BOTB.

Fund switch 3

100% out of Baillie Gifford Positive Change and 100% into Jupiter Income Trust - again this reduces my exposure to technology plays in favour of more cyclical opportunities in the UK.

Fund switch 4

33% out of Invesco Global Emerging Markets (UK) and 100% into Marlborough European Multi-Cap - this reduces my exposure to Chinese equities and emerging market equities while boosting my European equity exposure to be more in line with the BOTB

Fund switch 5

100% out of T. Rowe Price Global Focused Growth Equity and 100% into Schroder Global Equity Income - the T. Rowe Price Global Focused Growth Equity had benefited from its blend of growth and value stocks but its performance has since dropped away. The Schroder fund, although a global fund, has 25% exposure to UK equities, compared to just 4% for the typical global equity fund. On the flip side it only has 16% exposure to US equities compared with 66% for the typical global equity fund. This switch helps bolster my UK equity exposure to be more in line with the BOTB while providing greater global equity exposure outside of the UK and US than the T. Rowe Price Global Focused Growth Equity fund.

Fund switch 6

100% out of VT Gravis Clean Energy Income and 100% into Fidelity American Special Situations - this switch helps compensate for the reduction in my indirect US equity exposure via global equity funds within my portfolio.

Overall the switches impact just over 27% of my portfolio, which is more than usual. However, the portfolio's growth bias in the current market warranted the change. It will be interesting to see whether the reflation trade continues or whether it has run its course. Only time will tell.

My portfolio

So my portfolio now looks like this:

Name	Allocation % (rounded)	Risk	Sector	ISIN Code
Artemis SmartGARP Global Equity	5.5	Medium	Global	GB00B2PLJP95
ASI Strategic Bond	15.5	Low	Sterling Strategic Bond	GB00BWK27X12
ES R&M UK Recovery	6	Medium	UK All Companies	GB00B614J053
Fidelity American Special Situations	5	High	North America	GB00B89ST706
Fidelity Global High Yield	8	Low	Sterling High Yield	GB00B7K7SQ18
Fidelity UK Smaller Companies	9	High	UK Smaller Companies	GB00B7VNMB18
Invesco Global Emerging Markets (UK)	7	Medium	Global Emerging Markets	GB00B3RW7S64
iShares Physical Gold ETC	4	Medium	Commodity & Energy ETF	IE00B4ND3602
JPM Natural Resources	5	High	Specialist	GB0031835118
Jupiter Income Trust	6	Medium	UK Equity Income	GB0004791389
Marlborough European Multi-Cap	3.5	High risk	Europe Excluding UK	GB0001719730
Premier Diversified Growth	10	Medium	Mixed Investment 40-85% Shares	GB00B8BJV423
Sarasin Global Dividend	8.5	Medium	Global Equity Income	GB00BGDF8F44
Schroder Global Equity Income	7	Medium	Global Equity Income	GB00B76V7M69

My Portfolio asset mix

My portfolio asset mix is as shown below which has around a 62% exposure to equities. The numbers in brackets are last month's equivalent figures.

• • UK Equities 23% (16%)
  • North American Equities 11% (11%)
  • Asian/Emerging Market Equities 6% (11%)
  • Japanese Equities 0% (0%)
  • European Equities 5% (4%)
  • Chinese equities 2% (5%)
  • Other equity 9% (8%)
  • Commodities and energy 9% (11%)
  • UK Fixed Interest 7% (7%)
  • Global Fixed Interest 15% (15%)
  • Cash 5% (0%)
  • Alternative Investment Strategies 8% (12%)

Damien's higher risk and lower risk portfolios

Using the logic described in my post: Update to Damien’s alternative risk portfolios I created hypothetical higher and lower risk versions of my portfolio below:

Higher risk

Fund	Allocation %
Artemis SmartGARP Global Equity	7
ES R&M UK Recovery	8
Fidelity American Special Situations	6.5
Fidelity UK Smaller Companies	12
Invesco Global Emerging Markets (UK)	9
iShares Physical Gold ETC	5
JPM Natural Resources	6.5
Jupiter Income Trust	8
Marlborough European Multi-Cap	5
Premier Diversified Growth	13
Sarasin Global Dividend	11
Schroder Global Equity Income	9

Lower risk

Fund	Allocation %
Artemis SmartGARP Global Equity	7
ASI Strategic Bond	20
ES R&M UK Recovery	8
Fidelity Global High Yield	10
Invesco Global Emerging Markets (UK)	9
iShares Physical Gold ETC	5
Jupiter Income Trust	8
Premier Diversified Growth	13
Sarasin Global Dividend	11
Schroder Global Equity Income	9