New Frontier. Global Strategic ETF Model Portfolios

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1 New Frontier Global Strategic ETF Model Portfolios

2 New Frontier is an institutional research and investment advisory firm specializing in the development and application of state-of-the-art asset management technology. Founded in 1999 by the inventors of the Michaud Resampled Efficient Frontier the firm holds four U.S. patents in asset management technology 1, licenses its software to institutional clients worldwide, provides global ETF portfolios, and continues to pioneer new developments in asset allocation and portfolio management. The portfolios feature New Frontier s patented investment technologies, cutting-edge research, high-quality exchange traded funds, and years of experience in quantitative institutional global asset management. New Frontier Efficient Asset Management published Resampling patent granted in U.S.A. First version of the Asset Allocation Suite released Investment advisory services offered New Frontier Advisors, LLC founded d Markowitz-Usmen experiment confirms resampling s value 1 U.S. patents 6,003,018, 6,928,418, 7,412,414, and 7,624,060. Additional patents pending. New Frontier is worldwide licensee.

3 New Frontier Model Portfolios The New Frontier global strategic ETF model portfolios are designed to be enhanced core investments suitable for meeting long-term investment objectives for many investors. The portfolios are available at six systematic risk levels ranging from 20% equity to all equity for both taxable and tax-managed investors. Risk-Targeted Portfolios Return Risk Core-Satellite Investing New Frontier portfolios are designed as optimal core investments within a core-satellite advisory framework. A core-satellite framework forms the institutional standard for a well-defined investment program. Core portfolios are designed to meet long-term investment objectives, while satellite investments are shorter-term focused and opportunistic. Core investing typically depends on an investor s risk tolerance, available funds, investment horizon, financial status, financial goals, and other factors. In contrast, satellite investing depends on investment expertise relative to current market opportunities. New Frontier provides solid core portfolios that can be combined with satellite investments for customized solutions for an individual s investment needs. Assets under management pass $500 million First research conference Assets under management pass $1 billion Sponsorship of Markowitz award at JOIM Fourth patent First foreign patent t granted Rebalancing Test patent granted 2nd edition of Efficient i Asset Management published 1 U.S. patents 6,003,018, 6,928,418, and 7,412,414. Additional patents pending. New Frontier is worldwide licensee. 2 Brinson et al. Financial Analysts Journal, 1986 and

4 Investment Process The four stages of an investment process are risk-return estimation, portfolio construction, fund selection, and rebalancing. New Frontier adds value to all four stages with institutional expertise and patented technologies. New Frontier uses state-of-the-art statistical techniques to improve the risk-return estimates derived from capital market data. Our investment committee incorporates current information including regulatory, economic, financial and other factors affecting global capital markets with advanced statistical methods. New Frontier is globally known for its innovations in portfolio management which uniquely and properly address uncertainty in investment information. Commercially available optimizers typically treat investment information as if it is certain, which is inconsistent with investor perspectives. Investment Calendar Monthly: We analyze dramatic market movements, update the risk and return estimates, calculate a new efficient frontier, and run the rebalance test. Quarterly: We examine the investment universe for possible ETF improvements, analyze the macroeconomic situation, update risk and return estimates, calculate a new efficient frontier, and run the rebalance test. Annually: We consider long-term capital gains, examine the investment universe for possible ETF improvements, analyze the macroeconomic situation, update risk and return estimates, calculate a new efficient frontier, and run the rebalance test. New Frontier accounts for the inherent uncertainty of investment information via our patented resampling process. The resulting Michaud efficient frontier is more stable and produces more investment intuitive and effective optimal portfolios. 2 Michaud optimization sets the world standard for effective portfolio diversification. New Frontier chooses ETFs that span the sources of investable global economic growth. ETFs feature broad diversification, transparency, tax efficiency, and liquidity. As an independent institutional manager, New Frontier is able to select the most liquid and representative low-cost ETFs from ishares, Vanguard, State Street, and others. 4 2 See Markowitz Says Michaud Has Built a Better Mousetrap Pensions & Investments, December 22, 2003 and Markowitz and Usmen, Journal Of Investment Management, 2003.

5 Investment Process continued New Frontier s resampling technology represents the first truly effective portfolio monitoring and rebalancing procedure. Traditional monitoring and rebalancing practices are typically ad hoc and often lead to trading in statistical noise or not trading when information may be available. The multi-patented Michaud rebalancing rule provides the first rigorous statistical measure for the decision to trade. It enhances investment value by recommending trading only when likely to be effective. New Frontier portfolios represent a unique combination of advanced technology with institutional quantitative investment experience, extensive research, and patented processes to provide optimized, risk-controlled portfolios suitable as core investments for many investors. New Frontier adds value and differentiation at each step relative to the traditional approach. STEP b Capital Market Outlook NF Solution: Financial theory, institutional expertise, and modern statistical techniques conditional on the market. NF Process: NF uses rigorous Bayesian technology. STEP c Portfolio Construction NF Solution: Patented Michaud optimization featuring the Resampled Efficient Frontier. NF Process: NF creates provably effective, optimally risk-managed portfolios, using Michaud optimization. STEP d Fund Selection NF Solution: Index fund ETFs. NF Process: NF selects low cost, highly representative funds. STEP e Portfolio Rebalancing NF Solution: Patented Michaud monitoring test. NF Process: NF applies continuous portfolio based statistical monitoring. Four patents! 5

6 New Frontier Global Strategic Asset Allocation New Frontier s core portfolios are globally well diversified and designed for long-term performance at six systematic risk levels. A global investment perspective offers more opportunities to add investment value and enhance diversification. Because compound return is reduced by volatility, long-term performance is also dependent on effective diversification. Finally, long-term investing must be risk-level appropriate. Studies of the long-term performance of institutionally managed portfolios showed that the stock/bond ratio of a diversified fund was the single most important factor explaining performance. 3 By applying cutting edge statistical tools to finance, with multi-patented technologies, New Frontier minimizes risk, diversifies effectively, and enhances both performance and the effectiveness of trading decisions. Quantitative Approach New Frontier s strategic and innovative quantitative investment perspective helps to mitigate human biases and ineffectiveness in investment management processes. From fund selection to portfolio monitoring, every step of the investment process is statistically rigorous, maximizing the value of invested assets. Some strategic asset managers are relatively passive and insensitive to changes in the investment environment. However, New Frontier s strategic core investments are not static. Our model portfolios are non-directional but sensitive to the evolving structure of economic, political, regulatory and capital market factors. Our state-of-the-art statistical estimation and quantitative institutional expertise provides true strategic core investments that are nevertheless appropriately sensitive to changes in capital markets and informed by reliable and relevant current information. In Summary Global strategic asset allocation State-of-the-art portfolio construction Exchange traded funds Patented portfolio monitoring 6 3 Brinson, Gary P. et al. "Determinants of Portfolio Performance." Financial Analysts Journal, July-August 1986, and "Determinants of Portfolio Performance II: An Update." Financial Analysts Journal, May-June 1991.

7 Available Products Global ETF Model Portfolios New Frontier provides six taxable and six tax-managed systematic risk-targeted Global ETF Model Portfolios. Each of the New Frontier-managed, ETF model portfolios are designed as core investments suitable for long-term core investors. New Frontier s patented technologies, institutional expertise, and low cost ETFs provide a suitable core investment for many longterm investors. New Frontier Risk Levels Conservative 20/80 Moderate Conservative 40/60 Moderate 60/40 Moderate Growth 75/25 Growth 90/10 Maximum Growth 100/0 Retirement Distribution Strategies New Frontier offers market-based investment strategies based on our Global ETF Model Portfolios at four income distribution options and three risk tolerance levels. New Frontier s strategies provide an appropriate investment program for many retirement income investors. Many retirees rely on investment income for meeting current financial needs and long-term objectives. Proper financial planning requires consideration of income risk as well as long-term investment goals. Our market based distribution strategies are often more cost efficient without limiting upside return. Investment Committee New Frontier s investment policy committee members are experienced institutional quantitative investment managers with many years of experience. Dr. Richard O. Michaud Robert O. Michaud Dr. David Esch Elise M. Schroeder 7

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