Frontier Complete Portfolios
Frontier Financial’s main investment solutions begin with one model each for stocks (equities) and for bonds. Frontier then combines the stock and bond models into four Frontier Complete Portfolios.
The Conservative portfolio contains 25% stocks and 75% bonds, the Balanced portfolio holds 50% each stocks and bonds, the Balanced Growth portfolio is 75% stocks and 25% bonds, and the All-Equity portfolio is entirely stocks. A separate Frontier Financial proprietary account track's each portfolio’s live performance from the end of 2021.
The Conservative portfolio contains 25% stocks and 75% bonds, the Balanced portfolio holds 50% each stocks and bonds, the Balanced Growth portfolio is 75% stocks and 25% bonds, and the All-Equity portfolio is entirely stocks. A separate Frontier Financial proprietary account track's each portfolio’s live performance from the end of 2021.
Inside the Portfolios: Types of Holdings
The Frontier Complete portfolios use investment vehicles such as mutual funds, exchange-traded funds (“ETFs”) and institutional pooled funds, and do not hold individual stocks or bonds directly. The portfolios contain only Series F and equivalent funds, whose embedded fees reflect only fund management costs and not client advisory fees.
Frontier makes extensive use of passively-managed (“indexed”) funds, a very low-cost method to obtain financial market exposure. A passively-managed fund almost exactly mimics its underlying benchmark index’s holdings and those holdings’ weights, and so its performance before costs very closely matches that index.
In contrast, an active fund’s manager attempts to outperform the fund's underlying benchmark index by owning only some index holdings, and in different proportions than their index weights. Due to the additional research and personnel involved, active management typically costs more than passive management.
Though Frontier’s default is to use passive investment funds, we are not doctrinaire: we will use an actively-managed fund when we think its additional investment benefits will likely outweigh its additional cost. For example, Frontier currently uses an actively-managed bond fund for half of its bond model.
Frontier makes extensive use of passively-managed (“indexed”) funds, a very low-cost method to obtain financial market exposure. A passively-managed fund almost exactly mimics its underlying benchmark index’s holdings and those holdings’ weights, and so its performance before costs very closely matches that index.
In contrast, an active fund’s manager attempts to outperform the fund's underlying benchmark index by owning only some index holdings, and in different proportions than their index weights. Due to the additional research and personnel involved, active management typically costs more than passive management.
Though Frontier’s default is to use passive investment funds, we are not doctrinaire: we will use an actively-managed fund when we think its additional investment benefits will likely outweigh its additional cost. For example, Frontier currently uses an actively-managed bond fund for half of its bond model.
Asset Mix and Diversification
The Frontier Complete portfolios are very broadly diversified. On a look-through basis its bond model indirectly owns the debt of more than 200 different issuers, and its stock model indirectly owns shares in more than 2,400 companies located in Canada and across the world, and in all industries.
The stock model’s geographic stock exposure is currently about 25% Canadian, 45% US and 30% international. It is neither Canada-focused nor Canada-avoiding. This provides significant protection against an unforeseen problem in any one region, such as US stocks’ “lost decade” from 2000-2009, and also allows comparison with many similar mutual fund portfolio programs offered throughout Canada.
The stock model’s geographic stock exposure is currently about 25% Canadian, 45% US and 30% international. It is neither Canada-focused nor Canada-avoiding. This provides significant protection against an unforeseen problem in any one region, such as US stocks’ “lost decade” from 2000-2009, and also allows comparison with many similar mutual fund portfolio programs offered throughout Canada.
Why Just One Set of Portfolios?
Unlike many competitors, Frontier offers only one set of portfolios (*with a small exception explained below). For example, it does not also offer a set of Canada-focus or technology-focus portfolios. It has two main reasons for this policy.
First, one set of model portfolios creates consistent performance for all clients.
Second, Frontier puts its best ideas into just that one set of portfolios and then lives by those results. That does not guarantee the portfolios’ performance, but it guarantees that our efforts are focused on only those portfolios. We are expected to deliver expertise, not a multitude of choices that push the important investment decisions back onto the client.
*The small exception is that the Frontier models used by Wellington-Altus advisors differ slightly from the Frontier Complete Portfolios. However, the underlying stock and bond model holdings and weights are very similar and mainly the same, and so their investment performance over 4.5 years is nearly identical.
First, one set of model portfolios creates consistent performance for all clients.
Second, Frontier puts its best ideas into just that one set of portfolios and then lives by those results. That does not guarantee the portfolios’ performance, but it guarantees that our efforts are focused on only those portfolios. We are expected to deliver expertise, not a multitude of choices that push the important investment decisions back onto the client.
*The small exception is that the Frontier models used by Wellington-Altus advisors differ slightly from the Frontier Complete Portfolios. However, the underlying stock and bond model holdings and weights are very similar and mainly the same, and so their investment performance over 4.5 years is nearly identical.
