Frontier Conservative Fund

by Richard Allum on 1 June 2008

Fund Legal Name:  Multi Asset Platform: Conservative Portfolio

Manager:  Frontier Capital Management LLP

Initial Charge:  Up to 5%

AMC:  A Share Class: 1.5% (including trail fees), C Share Class: 1.0%

TER:  A Share 1.8%, C Share 1.3%

Launch Date:  September 2005

IMA Sector:  N/A

Offshore Fund Domiciled in the Cayman Islands.

Aim: The investment objective of the Frontier Multi Asset Platform (MAP) Conservative Fund is to deliver capital growth and stable consistent annual returns through the economic cycles.  The fund will provide the investor with a global multi-asset class portfolio with exposure to eight major asset classes with returns currency hedged into the investor’s base currency.  The asset class weights are maintained within specified boundaries to produce a low risk, low volatility portfolio.  Six of the eight asset classes are accessed through fee efficient index funds and advanced index replication techniques that allow the fund to access the return from each asset class for very low or no fees.

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Commentary:  Over the 12 months to February 2008 the MAP Conservative Fund generated strong returns despite the recent financial market turbulence, increasing in value by roughly 6.6%.  The Fund outperformed a number of industry benchmarks such as the average performance of funds in the UK Cautious Managed and Balanced Managed sectors.

The Frontier Capital investment approach is based on four key concepts that Frontier calls its “four investment pillars”, the first being that asset allocation drives the majority of portfolio return and risk.  The other investment pillars are: the importance of diversification and Modern Portfolio Theory; the efficiency and low cost of indexing; and that alternative assets reduce overall portfolio risk.

The asset allocation of the MAP Conservative Fund is determined on an annual basis.  Frontier follows a strategic approach to asset allocation as opposed to a tactical or market timing approach.  One significant input into the asset allocation is the asset allocation of the large US University endowment funds.  The university endowment funds of Harvard and Yale have been leaders in diversified multi-asset class investing for over two decades.

The Frontier MAP Conservative Fund can be thought of as a diversified wealth management solution suitable as a core portfolio of investments in the same way that a fund of funds might be used, except at a significantly lower cost.  Numerous studies have shown that the costs of active fund management and of switching between funds and sectors can erode a significant part of a portfolio’s returns.  Therefore, by establishing a core, diversified, low cost investment, investors can benefit from a stable return on their investment complemented by low costs with a low level of monitoring required.

The Frontier MAP Conservative Fund is suitable for holding in a number of investment wrappers, including SIPPs, SASS and life company bonds.  Frontier Capital Management LLP is planning to establish an onshore fund version sometime later in the year.

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