Perspective :

Millimeters matter

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There is no such thing as a perfect process.

Several years ago, I made a conscious decision to get serious about cycling. After years as an avid cyclist, I had reached a plateau in my performance – a limit to what a recreational cyclist could achieve on gumption alone. I decided it was time to take my game to the next level. However, I soon found out that achieving meaningful gains in performance would require much more than a change of heart or simply upping my training. In cycling – much like in most other challenging endeavors – in order to go from average performance and mediocre results to something significantly better, there is never any single action, but a whole process. Cycling success is the result of several factors. The main components needed are exercise, diet, rest, and tactics. Without dedication to a step-by-step process in which each of the four play an important role, no breakthrough will be made.

First, though, any cyclist wanting to up their game needs to have their bike professionally fitted. Surprisingly, my younger self had never even considered this step – after all: what difference could a few little tweaks to my bicycle make? After three hours of riding a computerized bike while hooked up to power meters monitoring my form while I was filmed, I realized I had been missing the main point of performance advancement. After all was said and done, and many tiny adjustments made to my bike, riding position, and form, I began to see the greatest performance gains I had ever achieved. I profusely thanked the bike fitter, a local legend. “Millimeters matter,” was his reply. And oh, how true that is.

To get serious about consistent investment performance is to get serious about process. And to get serious about process is to get serious about details and accuracy. Frontier’s investment process is comprised of four different sub-processes: mutual fund selection, asset allocation, strategy optimization, and trading and implementation. Each one of these processes is like a manufacturing line, where a multitude of steps, calculations, and decisions are being made each month. There are quite literally thousands of formulas that make up these processes. Change one formula, and you get a different result. Alter the steps, you could have a different outcome. It is all details and accuracy, a thousand times over.

It is worth noting here that simply having a process is not enough, but that everything within that process needs to move the action in the right direction. Frontier is not your average pie chart firm. Asset allocation is part of our overall process, but the quest for the “perfect” pie chart is not the goal of our process. There is no such thing as a perfect pie chart or a mythical combination of assets that will solve all of the client’s needs, all of the time. Nor will a pie chart alone save you. In our modern, interconnected marketplace, when markets turn south, assets become correlated in a hurry. Instead, Frontier’s investment process is outcome driven. The whole point of our process – and of every decision we make and formula we develop – is to provide a better result for our clients. This means less potential exposure to loss, a greater potential for growth, more consistent return patterns, lower taxes, and a strategy that is easy to live with.

Similarly, any effective process needs to focus on variables that can be measured and directly lead to outcomes. In other words, control what you can control. Much of the outcome investors will experience year-to-year is out of our control. We simply cannot control capital markets, and no one has perfect future knowledge.

Much of the investment world is seeking to outperform when capital markets performance is good. However, short-term return is the most unknowable variable in an investment process.  Ubiquitously, the industry looks to economic data, market technical data, or politics in an effort to predict short-term capital market performance. But this approach is merely “truthy”. It sounds right, it feels right, but there is no solid link between these factors and short-term market performance. It should be considered a financial law that capital markets lead the economy, not the other way around. If you want to make a prediction about the economy, look to capital markets. If asset prices are rising, chances are the economy is improving. However, if you reverse that equation and want to know how capital markets will perform, looking to the economy will yield random results, at best. As they say, the hall of fame of market timers is an empty room.

The focus of Frontier’s processes is based on variables that we can measure and or control.  Some of the more known or measurable variables we focus on include long-term capital markets expected returns, potential downside, mutual fund added value, mutual fund expenses, mutual fund combinations, taxes, and trading efficiencies. By focusing on these variables, we are better able to construct strategies for specific risk levels that perform well through a multitude of environments – not just the positive outcomes – and to be able to provide consistent mutual fund added value and to manage taxes. This focus has enabled Frontier clients to better withstand poor market environments and to achieve more consistent overall performance through the multitude of market environments that inevitably unfold.

Don’t be fooled to think that we – or anybody else, for that matter – have this whole thing figured out. There is no such thing as a perfect process. Everything can, and needs to, be constantly tested and continuously improved. We at Frontier are consistently further refining our mutual fund selection process, working on improving our earnings methodology in our equity expected return models, and seeking to improve efficiency of our tax management trading. All of these improvements involve testing logical concepts, turning them into math, and testing results through time in search of beneficial measurable outcomes. When you think big, but focus on details and accuracy, there is no end to the improvements you can achieve.

In the investment world, it is easy to think that performance is attributable to a salted guru making big bets that produce big wins. In reality, though, achieving consistent performance that survives a multitude of market environments requires running logical, effective processes over and over again. Performance is achieved on a tiny scale, from an accumulation of hundreds of decisions. The investment process itself either inches forward, one millimeter at a time, or its destiny is death by paper cuts. Every investment company faces this reality, whether they admit it or not.

In cycling, performance is easy to measure precisely, and progress – or lack thereof – is simple enough to track. Races are won with tight margins, often by millimeters, but the winner can still always be declared. In the world of investment, measuring performance and declaring a win or a loss is not that simple. Why? Because there isn’t just one parameter to define success but several, and the potential benefits that clients can achieve are multi-dimensional. Clients need risk management, growth in wealth, consistency of returns, tax management, and livability – not just one of these factors, but all of them. And while it is possible to improve the clients’ outcomes in all of the areas mentioned, it is often only by a small margin which can at times be hard to measure.  Yet when these constant small wins and minor outcome improvements are weaved together and accumulated over a long period of time, they can result in meaningful improved performance with great impact and significance. Millimeters matter.

Past performance is no guarantee of future returns. Performance discussed represents total returns that include income, realized and unrealized gains and losses, but gross of advisory fees. Nothing presented herein is or is intended to constitute investment advice or recommendations to buy or sell any types of securities and no investment decision should be made based solely on information provided herein. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for any investor’s financial situation or risk tolerance. Diversification and asset allocation do not ensure a profit or protect against a loss. All performance results should be considered in light of the market and economic conditions that prevailed at the time those results were generated. Before investing, consider investment objectives, risks, fees and expenses. Frontier may modify its process, opinions and assumptions at any time without notice as data is analyzed. All calculations of performance are by Frontier.

Exclusive reliance on the information herein is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell any securities, commodities, treasuries or financial instruments of any kind. This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal, investment or tax advice. Frontier does not directly use economic data as a part of its investment process.

Information provided herein reflects Frontier’s views as of the date of this newsletter and can change at any time without notice. Frontier obtained some of the information provided herein from third party sources believed to be reliable, but it is not guaranteed, and Frontier does not warrant or guarantee the accuracy or completeness of such information. The use of such sources does not constitute an endorsement. Frontier’s use of external articles should in no way be considered a validation. The views and opinions of these authors are theirs alone. Reader accesses the links or websites at their own risk. Frontier is not responsible for any adverse outcomes from references provided and cannot guarantee their safety. Frontier does not have a position on the contents of these articles. Frontier does not have an affiliation with any author, company or security noted within. Frontier reserves the right to remove these links at any time without notice.

Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. The estimates, including expected returns and downside risk, throughout are calculated monthly by Frontier and will change from month to month depending upon factors, including market movements, over which Frontier has no control. They are only one factor among many considered in Frontier’s investment process and are provided solely to offer insight into Frontier’s current views on long-term future asset class returns. They are not intended as guarantees of future returns and should not be relied upon in making investment decisions.

Frontier provides model strategies to various investment advisory firms and does not manage those models on a discretionary basis. The performance and holdings of model strategies may vary from strategies managed by Frontier.

Frontier’s ADV Brochure and Form CRS are available at no charge by request at or 307.673.5675 and are available on our website They include important disclosures and should be read carefully.

Frontier Asset Management is a registered investment adviser with the U.S. Securities and Exchange Commission; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made.  Additional information about Frontier and its investment adviser representatives is available on the SEC’s website at

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