Beyond the Traditional Pie Chart

For decades, diversification has been illustrated with a pie chart: stocks, bonds, international equities, and perhaps a slice of alternatives. But a portfolio can look diversified on paper and still behave very differently than expected when markets get stressed.

As correlations across asset classes shift, stocks and bonds move together during certain market environments, and major indexes become increasingly concentrated, simply dividing a portfolio into more slices may not provide the diversification investors expect.

For advisors, that raises a more important question: Where are your clients’ returns actually coming from?

At Frontier Asset Management, we believe diversification goes beyond asset allocation. Manager selection adds another dimension, giving portfolios access to different investment philosophies, opportunity sets, structures, and potential sources of alpha.

That philosophy is particularly visible in our Balanced Strategy, where approximately 40% of the portfolio is currently allocated to managers with alternative-seeking or highly flexible mandates. These managers can venture beyond traditional public equities and fixed income, tapping into areas such as private markets, idiosyncratic value opportunities, and market-neutral strategies.

Here’s an inside look at four managers within this allocation, what makes their mandates different, and why we believe they can play an important role in a diversified portfolio.

Frontier Asset Management

Diversification Beyond the Pie Chart

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Traditional Asset Allocation

Divide the Pie

Diversification is typically viewed through asset-class allocations.

The traditional question:

How much is allocated to each slice?

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Another Dimension

Frontier’s Manager-Selection Approach

Diversify the Sources of Return

Approximately 40% of the Balanced strategy is allocated to managers whose mandates provide access to alternative sources of return or greater flexibility beyond conventional stock and bond exposures.

• Public Equity
• Private Equity
• Private Credit
• Real Assets
• Options
• Long / Short
• Global Fixed Income
• Market Neutral
• Flexible Cash

The additional question:

What’s actually driving the risk and return within each slice?

T. ROWE PRICE CAPITAL APPRECIATION FUND | 15% allocation

A multi-asset vehicle with institutional flexibility.

The T. Rowe Price Capital Appreciation Fund serves as a cornerstone for dynamic asset allocation. Closed to the general public, this mandate provides your clients with institutional-grade access to a highly flexible strategy.

• Private market access: The fund leverages late-stage venture opportunities, maintaining large private equity stakes in transformative companies like Anthropic (a frontrunner in the artificial intelligence sector) and Bending Spoons.
• Flexible allocation mandate: The portfolio managers can actively shift allocations across domestic and international stocks, public bonds, private debt, and private equity based on market conditions.
• Structural and risk hedges: The fund utilizes high-conviction healthcare stocks as a defensive market hedge, holds off-the-run and private debt instruments, and actively writes call options to seek to generate income and exploit market mispricings.

WHY IT MATTERS: One allocation can provide access to public equities, private companies, credit, options, and other opportunities that aren’t captured by a traditional stock/bond allocation.

PIMCO INCOME FUND | 12% allocation

Global fixed-income scale engineered for private credit.

Fixed income requires deep credit underwriting and global scale. As one of the world’s largest fixed-income managers, PIMCO utilizes its massive footprint to act as a primary liquidity provider.

• Direct private lending: Rather than relying solely on public bond issuances, PIMCO can act as a direct private lender to corporations. This allows the fund to capture structured, higher-yielding private debt.
• Infrastructure & AI buildout: The fund is a direct lender to the infrastructure underpinning the modern economy, including private financing for data centers and the global AI buildout.
• Global structural flexibility: PIMCO Income operates with a global mandate, investing in sovereign debt, currency exposures, futures, and private transactions worldwide, while selectively employing leverage to optimize returns.

WHY IT MATTERS: Fixed income doesn’t have to mean simply choosing a duration and credit-quality bucket. Manager flexibility can create access to opportunities well beyond traditional bond indexes.

FIRST EAGLE GLOBAL FUND | 8% allocation

A resilient, absolute-return approach rooted in real assets and resilient value.

First Eagle Global provides a distinct, downside-aware performance pattern that acts as an economic ballast, with return drivers that can differ from momentum-driven indexing.

• The ultimate Real Asset hedge: First Eagle is the largest private owner of physical gold in the world, and this fund holds $7 billion in gold bullion alongside actively traded gold mining equities which may help preserve purchasing power.
• Idiosyncratic Value focus: The equity sleeve strictly targets deeply mispriced, resilient global businesses. Returns are driven by individual corporate catalysts and value anomalies rather than broad macroeconomic momentum.
• Deferred capital deployment: The managers maintain an active cash position as a structural hedge, preserving dry powder to deploy aggressively into capital markets during dislocations and bear markets.

WHY IT MATTERS: Its return drivers can differ meaningfully from capitalization-weighted equity strategies, adding another potential source of diversification.

VICTORY MARKET NEUTRAL INCOME FUND | 4% allocation

A pure alpha, long/short strategy designed to strip out market beta.

To achieve a true alternative performance profile, the Victory Market Neutral strategy is built to seek steady income while neutralizing equity market directional risk.

• Long dividend-paying equities: The fund builds a robust baseline of yield by purchasing high-quality, dividend-paying domestic and international stocks in defensive sectors like utilities, energy, and financial services.
• Short equity index futures: To reduce the portfolio’s exposure to broad market declines, the managers short highly correlated index futures, such as the S&P 500, Russell 2000, and MSCI EAFE, effectively reducing broad market beta.
• Basis risk mitigation: The fund layers an overlay strategy using a specialized basket of options, equity futures, and VIX futures to actively manage basis risk, or the pricing gap between the individual dividend stocks owned and the broad indexes shorted.

WHY IT MATTERS: The objective isn’t simply to own another equity strategy. It’s to introduce a return stream designed to be less dependent on the direction of the equity market.

THE FRONTIER ADVANTAGE

By combining these complementary, highly specialized strategies, Frontier Asset Management adds another dimension to diversification. Rather than relying solely on how much is allocated to stocks, bonds, or other asset classes, we also consider what is driving the risk and return within each allocation and how those return drivers may behave when market conditions change.

That distinction can also help advisors have a different conversation with clients. When a client asks, “Am I diversified?” the answer shouldn’t depend solely on how many slices appear in the pie chart. The better questions may be: Where are my returns coming from? How correlated are those sources of return? And what happens when traditional relationships between asset classes break down?

This is where Frontier’s open-architecture approach to manager selection matters. While much of the industry has moved toward strategic asset allocation implemented through indexes or proprietary funds, Frontier continues to select from a broad universe of mutual funds and ETFs, giving our investment team another lever to seek diversification and manage risk.

Because asset allocation determines where capital goes.

Manager selection can help determine how that capital behaves once it gets there.