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Frontier Capital Management Frontier Capital Management Presentation Transcript

  • New Model Advisor 4 Pillars of Investing Expanding the Frontier of Investment Opportunities TM Frontier Capital Management LLP Berkeley Square House, 8th Floor, Berkeley Square, Mayfair, London W1J 6DB Telephone +44(0)20 7317 6900 Fax +44(0)20 7317 6901 www.FrontierCM.com Regulated by the Financial Services Authority Registered in England no. OC308325
  • Frontier Capital Overview 1. Frontier founded in 2004 to deliver a passive multi asset class “Endowment Style” fund to the wealth management market 2. Multi Asset Platform (MAP) funds launched in 2005: 4+ year track record and approximately $550 million AUM 3. 17 Partners/employees, FSA Authorised investment manager 4. Frontier works with a select group of wealth managers, charities and institutions providing a core multi asset investment solution 5. Frontier private label with National Bank of Kuwait 2008 6. Frontier selected as core solution for BlueFin and Succession 2009 7. Frontier focus is on education with a large commitment of resources to monthly workshops/seminars in/out of house 8. March 2009 launch of onshore MAP Balanced fund 9. April 2009 launch of Global Hedge: Hedge fund index tracker 2 Frontier Capital Management LLP
  • Frontier’s Investment Philosophy 4 Pillars of Investing or Evidence Based Investing 1. Traditional and Alternative asset classes will generate a return above inflation (real return) in the medium to long term (5 to 10 years) 2. The Strategic Asset Allocation of a portfolio will determine the vast majority of the portfolio’s return and risk. Market timing and tactical asset allocation changes are unlikely to add value but will add cost. 3. Modern Portfolio Theory: Diversification across a portfolio of asset classes reduces risk and increases risk adjusted returns 4. Low cost index investing outperforms the majority of actively managed investments and outperformance increases with time These investment principles are still sound - even in times of market crisis. 3 Frontier Capital Management LLP
  • Historical Return and Risk Analysis 4 Frontier Capital Management LLP
  • Risky Assets Generate Long Run “Real Returns” • Historical returns have been significantly higher than inflation • The return above cash is known as the “Excess Return” Asset Class Returns Above Inflation Asset Class Returns Above Inflation January 1973 to December 2008 January 1991 to December 2008 Inflation = 4.5% 14% Inflation = 2.2% 9% 8.1% 12.4% 7.3% 8% 7.3% 12% 6.5% 7% 10% 8.5% 8.4% 8.4% 6% 7.1% 6.9% 8% 5% 3.8% 6.2% 5.2% 4% 6% 3% 4% 2.8% 2% 2% 1% 0% 0% Global Global Emerging Emerging Global Commo- Hedge Managed 8 Asset UK UK UK Real Commo- 4 Asset Class Equities Fixed Equities Bonds Real dities Funds Futures Class Equities Bonds Estate dities Portfolio Income Estate Multi Asset Portfolios are equally weighted and rebalanced annually. Returns are GBP hedged. Accompanying notes are an integral part of this presentation. 5 Frontier Capital Management LLP
  • Probability of Return Capture Increases with Time Approximately 70% of periods produce returns above cash 60% Rolling 1 Year Annualised Returns: c. 70% of periods above cash 50% 40% 30% 20% 10% 0% -10% -20% Cash -30% Inflation 4 Asset Class Portfolio 8 Asset Class Portfolio -40% Dec-73 Dec-76 Dec-79 Dec-82 Dec-85 Dec-88 Dec-91 Dec-94 Dec-97 Dec-00 Dec-03 Dec-06 Accompanying notes are an integral part of this presentation. 6 Frontier Capital Management LLP
  • Probability of Return Capture Increases with Time Approximately 85% of periods produce returns above cash 30% Rolling 3 Year Annualised Returns: 85% of periods above cash 25% 20% 15% 10% 5% 0% Cash -5% Inflation 4 Asset Class Portfolio 8 Asset Class Portfolio -10% Dec-75 Dec-78 Dec-81 Dec-84 Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Accompanying notes are an integral part of this presentation. 7 Frontier Capital Management LLP
  • Probability of Return Capture Increases with Time Approximately 95% of periods produce returns above cash 30% Rolling 5 Year Annualised Returns: over 95% of periods above cash 25% 20% 15% 10% 5% Cash Inflation 4 Asset Class Portfolio 8 Asset Class Portfolio 0% Dec-77 Dec-80 Dec-83 Dec-86 Dec-89 Dec-92 Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Accompanying notes are an integral part of this presentation. 8 Frontier Capital Management LLP
  • Probability of Return Capture Increases with Time Worst 10 year holding period produced 4% per year above cash 25% Rolling 10 Year Annualised Returns: 100% of periods above cash Worst 10 year return 4.0% p.a. above cash (8 Asset Class) 20% 15% 10% 5% Cash Inflation 4 Asset Class Portfolio 8 Asset Class Portfolio 0% Dec-84 Dec-86 Dec-88 Dec-90 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Accompanying notes are an integral part of this presentation. 9 Frontier Capital Management LLP
  • Probability of Return Capture Increases with Time For investors with 10 year or longer time horizons, risk is reduced Multi asset portfolios have generated 5.2% per year more than cash 4 ASSET CLASS 8 ASSET CLASS PORTFOLIO PORTFOLIO Jan 73 to Dec 08 Jan 91 to Dec 08 Ann. Return 11.9% 10.6% Ann. Volatility 10.4% Table 1: Multi Asset Class Portfolio Performance 8.4% Return / Volatility 1.1 1.3 1 Year Rolling % > Cash 67% 76% 3 Year Rolling % > Cash 86% 97% 5 Year Rolling % > Cash 95% 99% 8 Year Rolling % > Cash 99% 100% 10 Year Rolling % > Cash 100% 100% Accompanying notes are an integral part of this presentation. 10 Frontier Capital Management LLP
  • Strategic Asset Allocation 11 Frontier Capital Management LLP
  • Strategic Asset Allocation as a Portfolio Driver Brinson, Hood, Beebower, Journal of Finance,1986 1.80% 2.10% 91.50% 4.60% Asset Allocation Individual Investment Selection Other Market Timing Source: Brinson, Hood, Beebower, Journal of Finance, November 1987 12 Frontier Capital Management LLP
  • Strategic Asset Allocation as a Portfolio Driver Percentage of Return Explained by Asset Allocation M easure Brinson Brinson Ibbotson - Ibbotson - (1986) (1991) M utual Pension Percentage 93.6% 91.5% 81.4% 88.0% Active Return -1.10 -0.08 -0.27 -0.44 •When a portfolio contains more than one Asset Class (i.e. Equities and Bonds), the performance of the Asset Classes determines the majority of the return of the portfolio •Therefore, ASSET CLASS selection and weight is the SINGLE MOST IMPORTANT driver of multiple Asset Class portfolio returns 13 Frontier Capital Management LLP
  • UK Asset management Industry • “Institutional investors may be devoting insufficient resources to Asset Allocation which may contribute the majority of their investment performance.” Myners Report, March 2001 • “For the individual investor, the asset allocation decision is by far the most important factor in determining returns.” Sandler Report, July 2002 14 Frontier Capital Management LLP
  • Extreme Variability of Asset Class Performance Not possible to consistently forecast asset class winners / losers and frequent tactical changes increase cost / risk 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Best 60% 11% 75% 5% 27% 39% 24% 22% 66% 50% 10% 32% 56% 30% 34% 37% 39% 17% 39% 11% 44% -1% 21% 34% 17% 11% 41% 20% 7% 14% 31% 26% 26% 32% 25% 8% 20% 9% 25% -2% 20% 29% 15% 8% 29% 16% 3% 11% 29% 17% 16% 17% 9% -10% 16% 8% 22% -4% 18% 18% 13% -6% 26% 11% 2% 9% 24% 12% 12% 10% 8% -22% 14% 7% 20% -4% 14% 17% 11% -11% 25% 5% -1% 6% 21% 11% 12% 9% 6% -38% 13% 4% 19% -6% 11% 13% 9% -14% 3% 3% -3% 0% 12% 6% 6% 5% 6% -39% 13% 2% 12% -7% 10% 8% -12% -25% 1% -8% -14% -6% 11% 5% 5% 3% 6% -45% Worst -6% -4% -12% -19% -5% 6% -14% -36% -4% -31% -32% -25% 3% 3% 4% -15% -16% -53% Global Equities Global Bonds Emerging Equities Emerging Bonds Real Estate Commodities Hedge Funds Managed Futures For example, Emerging Equities were the top performing asset class 1991-1993, then consistently bottom (with the exception of 1999) to 2002. This asset class was again a top performer 2003-2007 followed by a loss of more than 50% in 2008. Accompanying notes are an integral part of this presentation. Returns are in USD. 15 Frontier Capital Management LLP
  • Market Timing/Tactical Asset Allocation • Definition: A market timer attempts to opportunistically move into and out of different asset classes in order to increase returns i.e. moving out of stocks and into bonds during a bear market • David Dreman study of “expert” market strategists going back to 1929 • Results indicated that the consensus was WRONG 77% of the time • Graham and Campbell study of 237 “market timing” newsletters • Less than 25% of recommendations were correct (less than the random 50% achievable by throwing darts) • No advisors were consistently correct (no persistence) • The only consistency found was for the worst advisors who were wrong very often • Malcolm Forbes: “The only money made in the investment newsletter business is in the subscription fees – not in the advice” 16 Frontier Capital Management LLP
  • Markets Create Wealth • Markets create wealth (risk premium) • Market timing destroys wealth(mostly) • Inflation erodes wealth • Fees and costs erode wealth • Help clients to “Stay the Course” Frontier Capital Management LLP 17
  • Modern Portfolio Theory 18 Frontier Capital Management LLP
  • Multi Asset Investing improves risk-adjusted returns Combining asset classes with variable correlations increases returns and significantly decreases risk (maximum loss) Benefits of Modern Portfolio Theory (January 1991 – December 2008) PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3 PORTFOLIO 4 PORTFOLIO 5 PORTFOLIO 6 Global Equities 100% 60% 50% 40% 30% 25% Global Fixed Income 30% 30% 30% 30% 25% Global Real Estate 10% 10% 10% 10% 10% Commodities 10% 10% 10% 10% Emerging Equities 5% 5% 5% Emerging Bonds 5% 5% 5% Hedge Funds 10% 10% Managed Futures 10% TOTAL 100% 100% 100% 100% 100% 100% Annualised Return 7.4% 8.7% 8.8% 9.5% 9.5% 9.8% Volatility (Ann Std Deviation) 13.8% 9.0% 8.2% 8.3% 7.5% 7.0% Maximum Loss -44.3% -27.8% -26.9% -26.6% -24.5% -21.2% Avg Top 3 Maximum Losses -40.1% -26.2% -25.7% -25.0% -23.0% -19.8% Return/Volatility Ratio 0.54 0.97 1.07 1.15 1.27 1.40 Return/Maximum Loss Ratio 0.17 0.31 0.33 0.36 0.39 0.46 Return/Top 3 Maximum Losses 0.18 0.33 0.34 0.38 0.41 0.49 Returns above use major benchmark indices for each asset class and assume annual rebalancing. Accompanying notes are an integral part of this presentation. Returns are hedged into GBP. 19 Frontier Capital Management LLP
  • Hedge Funds / Managed Futures vs Equities Global Hedge Managed Period Equities Funds Futures Nov -07 to Feb-09 -50.4% -22.7% +13.6% Sep-00 to Mar-03 -46.0% 0.0% +29.2% Jan-90 to Sep-90 -28.0% +14.7% +24.2% Sept-87 to Nov -87 -20.5% -8.0% +8.2% Dec-80 to July-82 -19.3% na +16.7% 20 Frontier Capital Management LLP
  • Theory Into Practice: The Super Endowments 21 Frontier Capital Management LLP
  • Innovative Multi Asset Portfolios Multi asset portfolios with high historical risk adjusted returns Top 5 Endowments (Assets > $10bn) -2% Global Equities 24% Global Fixed Income 16% Emerging Equities Emerging Bonds 8% Real Estate 25% 10% Commodities Hedge Funds 9% Private Equity 10% 1% Cash Source: NACUBO 2005; Annual reports (various); Frontier Capital Management. Accompanying notes are an integral part of this presentation. 22 Frontier Capital Management LLP
  • Innovative Portfolios & Exceptional Returns • Innovative portfolios with exposure to multiple asset classes • Significantly higher returns than traditional equity/bond portfolios • Allocations to alternative assets boost performance 10yr Annualised Total Alternative 2007/08 Return Return Equity / Bond Portfolio 0.0% -5.1% 3.4% Average Endowment 23.6% -3.0% 6.5% Greater than $1bn 53.5% 0.6% 9.5% Top 5 Endowments 64.4% 4.4% 13.7% 23 Frontier Capital Management LLP
  • Large Endowments: Stable Asset Allocations • Top 5 Endowments average annual change only 7% pa • Implementation lags do not have a significant impact on performance Top 5 Average Asset Allocation 110% 1 100% 90% Private Equity 1 80% Hedge Funds 70% 1 60% Real Estate Emerging Bonds 50% Commodities 1 40% Emerging Global Bonds Equities 30% 0 20% Global Equities 10% 0 0% Cash -10% 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Estimated average asset allocation of the top 5 endowments is calculated by Frontier. The lagged impact of returns uses Frontier asset benchmark indices and the estimated average asset allocation of the Top 5 endowments. Accompanying notes are an integral part of this presentation. 24 Frontier Capital Management LLP
  • Active Management Vs Index Investing 25 Frontier Capital Management LLP
  • Active Underperformance Percentage of Active Funds Underperforming The Index 100% European Funds U.S. Funds Emerging Mkt Funds 90% 12.5% 85% 87% 88% 87% 80% 70% 75% 76% 78% 72% 60% 50% 40% 30% 20% 10% 0% 3 years 1 5 years 2 10 years 3 Source: Lipper, MSCI, S&P, The Vanguard Group 26 Frontier Capital Management LLP
  • Index Investing Minimises Hidden Cost • Active management costs are significantly higher than index investing costs • Visible “Above Water” Total Cost Iceberg – Management Fees Significantly higher vs indexing • Hidden “Below Water” – Trading Commissions Active funds higher turnover than buy & hold indexing – Bid / Ask Spread Price to buy, another to sell – Market Impact Costs Larger buy/sell orders affect price 27 Frontier Capital Management LLP
  • Quotes “Most investors will find the best way to own equities is through an index fund that charges minimal fees. They are sure to beat the net results (after fees and expenses) delivered by the majority of investment professionals.” Warren Buffett, 1997 “Most people think they can find managers who can outperform … I would say that 85 to 90 percent of [active] managers fail to match their benchmarks.” Jack Meyer, former President, Harvard University Endowment Fund, 2004 “Most of the mutual fund investments I have are in index funds.” Charles Schwab, pioneer of online brokerage, 1998 28 Frontier Capital Management LLP
  • Frontier’s Investment Philosophy Pillar One Traditional and Alternative asset classes will generate a return above inflation and cash over the medium term (5 to 10 years) • The return is embedded in the asset class itself and therefore a fund manager is not necessarily required (ETF or tracker) • Historical returns of multi-asset portfolios have averaged approximately 8% per year above inflation before costs • Most wealth managers target inflation plus 2%-6% per annum. Therefore, asset classes have historically delivered everything needed for clients to achieve their goals • Portfolios have experienced negative yearly returns 25% of the time but as the time horizon increases, the probability of positive returns increases dramatically • Based on history, clients with a 5 to 10 year time horizon have a high probability of achieving a return above cash and inflation 29 Frontier Capital Management LLP
  • Frontier’s Investment Philosophy Pillar Two The Strategic Asset Allocation of a portfolio will determine the vast majority of the portfolio’s return and risk. • The impact of manager selection and short term market timing or tactical asset allocation changes is likely to be negligible over time and could be negative • Managers within an asset class will rise and fall with the performance of the asset class with only small deviations • It is not possible to consistently forecast the future direction and turning points of major asset classes • Behavioural responses to bull and bear markets can precipitate poor investment decisions that severely impact returns • An important role of the professional financial advisor is to educate clients and help them to “stay the course” 30 Frontier Capital Management LLP
  • Frontier’s Investment Philosophy Pillar Three Modern Portfolio Theory: Diversification across a portfolio of asset classes reduces risk and increases risk adjusted returns • Nobel Prize winning idea still valid after more than 50 years • Key point is to build globally diversified portfolios of asset classes with different correlations • Inclusion of alternative asset classes very important • 2008 liquidity crunch meant almost all asset classes fell and diversification did not work as well as many expected but has worked better in 4 of 5 major bear markets over 30 years • Large university endowments have been leaders in multi asset investing for two decades and have re-affirmed their commitment to this strategy going forward 31 Frontier Capital Management LLP
  • Frontier’s Investment Philosophy Pillar Four Low cost index investing outperforms the majority of actively managed investments and outperformance increases with time • Simple logic means the total return of all active portfolios must equal the market return, minus the costs of active management • Active management costs are higher than indexing particularly “below the waterline” commissions, spreads, impact costs • Approximately one third of managers outperform the index each year but this drops to only 10% over ten years or longer • The best managers from the past do not repeat. Manager turnover is high and switching funds is expensive • The negative impact of selecting the wrong fund can be large • Can a Financial Advisor add value here when full time professionals fail? Is this the best value added for your time? 32 Frontier Capital Management LLP
  • Multi Asset Platform Fund Expanding the Frontier of Investment Opportunities TM Frontier Capital Management LLP Berkeley Square House, 8th Floor, Berkeley Square, Mayfair, London W1J 6DB Telephone +44(0)20 7317 6900 Fax +44(0)20 7317 6901 www.FrontierCM.com Regulated by the Financial Services Authority Registered in England no. OC308325
  • Summary - Multi Asset Platform (MAP) • Asset Allocation fund inspired by the US Endowment Funds – Access to 8 asset classes in a single fund, traditional and alternative • Seven asset classes accessed through low cost Index Investing – Asset classes accessed directly for lower cost, no use of ETFs • Hedge Funds accessed via unique low cost tracker fund – Diversified across 70+ single hedge funds plus synthetic replication • Two funds create a platform for varying risk tolerance/time horizon – Conservative Fund: no leverage, 5 year time horizon – Moderate Fund: 100% leverage, 10 year time horizon • Exceptional transparency, liquidity and cost efficiency – Liquidity twice monthly, 5 days notice, no lock ups, onshore fund daily – Flat management fee 0.75%; No performance fee Accompanying notes are an integral part of this presentation. 34 Frontier Capital Management LLP
  • Asset Allocation Inspired by Endowments • Strategic allocation, annually rebalanced, private equity excluded • Allocation reflects Frontier’s time horizon and volatility target of 5-7% Quantitative University Frontier Analysis Endowments Experience 2009 Asset Allocation Global Equities 15% 12% 15% Global Fixed Income 18% Emerging Equities 5% Emerging Bonds 5% 25% 18% Global Real Estate 10% Commodities 10% 5% 10% 5% Hedge Funds 25% 10% Managed Futures 12% Accompanying notes are an integral part of this presentation. 35 Frontier Capital Management LLP
  • One Fund … Eight Asset Classes Traditional Asset Classes Alternative Asset Classes • Global Equities • Global Real Estate MSCI World Equities (Currency Hedged) Dow Jones Wilshire Global (Currency Hedged) 23 countries, 1894 equities 27 countries, 238 securities • Global Fixed Income • Commodities Barclays Global Aggregate Bond (Currency S&P GSCI Light Energy Index Hedged) 5 Sectors 35 countries, 12,105 bonds 24 Commodities • Emerging Equities • Hedge Funds MSCI Emerging Market Equities Global Hedge Index Fund 25 countries, 854 equities 70+ Single Hedge Funds plus liquid replication • Emerging Bonds • Managed Futures JP Morgan Emerging Market Bonds Fund of Funds 33 countries, 145 bonds 50+ Commodity Trading Advisors (CTAs) 36 Frontier Capital Management LLP
  • Index Investing = Lowest Costs • Fee and cost savings are both above and below the waterline – MAP Management fee lower than other active multi asset funds – MAP indexing produces large “below waterline” savings vs. active funds MAP "Below Waterline" 2.40% Savings MAP Savings: 2.3% 2.20% Management Fees 2.00% Trading Commissions 1.80% Bid/Ask Spread Cost 1.60% Market Impact Cost 1.40% 1.20% 1.00% 0.80% Global Emerging Real Commo- Equities Equities Estate dities 0.60% 0.44% 0.45% Emerging Hedge Global 0.40% 0.40% Bonds Funds Bonds Managed 0.40% 0.22% 0.19% Futures 0.16% 0.20% 0.05% 0.00% Frontier total cost savings based on Benchmark Asset Allocation weights and published research on cost savings across asset classes. 37 Frontier Capital Management LLP
  • Index Investing = Lowest Costs • Fee and cost savings are both above and below the waterline • 2.3% saving generates significant difference in compounded returns over time Value of Initial 250,000 Investment (10% growth pa) 4.4 Low Cost million Portfolio 2.2 2.3% Annual Savings million 2.2 million High Cost Portfolio 0 60 5yrs 120 10yrs 180 15yrs 240 20yrs 300 25yrs 360 30yrs 420 Frontier total cost savings based on Benchmark Asset Allocation weights and published research on cost savings across asset classes. 38 Frontier Capital Management LLP
  • Summary – Multi Asset Platform (MAP) • One fund, 8 asset classes, 15000+ securities*, ideal core investment • Multi asset approach at very low cost • Disciplined asset allocation with rebalancing & currency hedging • Optimised portfolios using leverage for varying risk profiles • Excellent liquidity and transparency Satellite Low Risk Moderate Risk Higher Risk Investments in Gold, Equities, Private Equity, etc… Core Frontier Conservative Core Core (No leverage) Frontier Moderate Frontier Moderate (100% leverage) (100% leverage) * This number represents the number of the securities within the reference asset class indices to which the Fund accesses the returns. 39 Frontier Capital Management LLP
  • Frontier Capital Strategic Partnerships • Frontier want to provide an extremely high level of service to a small number of “Strategic Partners” (100) • Common understanding of how capital markets function • Frontier focus on education: research available on 4 Pillars • 4 Pillars and Hedge Fund Masterclass held every month • Strategic status means helping you to simplify and systemise your investment offering and build your business • Outsourced one stop investment solution • Internal educational presentations • Development of your own Investment Policy • Jointly sponsored client days: “bring a friend” • Frontier Engagement Process: Mutual due diligence 40 Frontier Capital Management LLP
  • Contact Details London Michael Azlen (CEO) Bruce Gascoine Berkeley Square House Colin Hodges (COO) Partner, Berkeley Square Telephone: +44 (0) 207 317 6900 Business Development Mayfair, London Facsimile: +44 (0) 207 317 6901 Telephone: +44 (0) 20 7317 6908 W1J 6DB Azlen@FrontierCM.com Mobile: +44 (0) 776 0263 666 United Kingdom Hodges@FrontierCM.com Gascoine@FrontierCM.com Andrew Cracknell Jo Nhan Partner, Business Development Business Development Manager Telephone: +44 (0) 152 783 9747 Telephone: +44 (0) 207 317 6923 Mobile: +44 (0) 781 0484 023 Mobile: +44 (0) 779 2525 635 Cracknell@FrontierCM.com Nhan@FrontierCM.com Website: www. FrontierCM.com Email: info@frontiercm.com 41 Frontier Capital Management LLP
  • MAP Funds Available From: SIPP Providers Life Companies www.standardlife.com www.sippdeal.co.uk www.canadalifeint.com www.jameshay.co.uk www.hornbuckle.co.uk www.fpinternational.com www.winterthur-life.co.uk Platforms www.transact-online.co.uk www.spila.com www.ascentric.co.uk www.axa-iom.co.im www.nucleusfinancial.com www.raymondjames.co.uk 42 Frontier Capital Management LLP
  • Notes & Disclaimer 1. The Frontier Multi Asset Platform Funds were invested on September 2nd, 2005. Prior data is pro-forma and has been calculated from the original asset allocation weights applied to the original Indices and rebalanced annually at December 31 each year. Pro-forma performance is net of 50 basis points per annum to take into account index replication costs, currency hedging and annual rebalancing costs. Performance data from September 2005 to October 2006 inclusive is based on actual fund NAVs restated to reflect current fee levels. The Plus fund was invested in July 2006. 2. While Frontier has developed methods of preparing pro-forma returns that it believes to be reasonable, fair and complete, there can be no assurances that the results derived from such methods are correct, accurate or reliable. Accordingly, the informational value of pro-forma returns is limited. 3. Non-USD index returns have been hedged into USD except for Emerging Market Equities. All returns are USD based unless otherwise stated. 4. Frontier annual cost savings are based on current asset allocation weights and published research on the total costs of active investing vs index investing across asset classes, with management fee savings based on fund of funds investing. 5. Each asset class is represented by a relevant market index. UK Equities are represented by the FTSE All Share Total Return Index. UK Bonds are represented by the Citigroup 10-year Gilt Benchmark Index. US Equities are represented by the Standard & Poor’s 500 Total Return Index. US Bonds are represented by the Citigroup 10-year Treasury Benchmark Index. European Equities are represented by the MSCI Europe ex UK Total Return Index. European Bonds are represented by the Citigroup 10-year European Benchmark Index. Commodities are represented by the S&P GSCI Index until April 2007 and the S&P GSCI Light Energy Index thereafter. Hedge Funds are represented by the HFR Fund of Funds index (minus 1% survivorship bias) and Managed Futures by the CISDM Asset Weighted Index (minus 1% survivorship bias). Cash returns are UK 1 Month Libor minus 1% per annum. 6. Fund performance persistence data is sourced from S&P Mutual Fund Performance Scorecard (2006) and covers those firms that were top quartile over five years to June 2001 (393 funds, comprising 269 Large cap US equity and 124 small cap US equity). Over the following five years, only 3 large cap funds and one small cap fund maintained a top quartile performance ranking. 7. The Frontier asset allocation process combines multiple inputs including reference to major US University endowments but also includes quantitative analysis and the inputs of the Frontier Asset Allocation Committee. Frontier does not expect similar returns to those of the endowments in the MAP Conservative Fund due to the lack of private equity exposure and a significantly lower volatility target than most endowments. 8. Endowment data is sourced from NACUBO and annual reports; calculations by Frontier Capital Management. 9. Fund data is sourced from Bloomberg and assumes the reinvestment of any dividends issued at the time of their issuance. Bloomberg data has not been checked or verified by Frontier Capital Management DISCLAIMER This document is issued for information purposes only by Frontier Capital Management LLP (“Frontier”) in respect of the Multi Asset Platform Fund Segregated Portfolio company (the ‘Fund’). Frontier is authorized and regulated by the Financial Services Authority (“FSA”). The Fund is defined as an unregulated collective investment scheme and the promotion of such a scheme either within the UK or from the UK is restricted by the Financial Services and Markets Act 2000 (“FSMA”). Consequently, this document is only made available to professional clients and eligible counterparties as defined by the FSA Conduct of Business Sourcebook 4.12.1R and the statutory requirements under FSMA. This document does not constitute an offer by Frontier to enter into any contractual/agreement nor is it a solicitation to buy or sell any investment. Nothing in this document should be deemed to constitute the provision of investment, financial or other professional advice in any way. Potential investors are directed to the read the Fund prospectus and should always consult with their professional advisors. The contents of this document are based upon sources of information believed to be reliable. Frontier has taken reasonable care to ensure the information stated is factually true. However, Frontier make no representation, guarantee or warranty that it is wholly accurate and complete. PAST PERFORMANCE IS NOT NECESSARILY A GUIDE TO FUTURE PERFORMANCE. 43 Frontier Capital Management LLP