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Frontier Capital tells Sarasota board recent fiscal year lagged the benchmark but long‑term returns remain strong
Summary
Frontier Capital told the Sarasota City pension board that its small‑cap value strategy underperformed the Russell 2000 Value in the fiscal year ending 09/30/2025 but has delivered strong long‑term net returns; the firm answered board questions about sector drivers and recent market rotation.
Manny Frenzhuel, corporate portfolio manager for Frontier’s Small Cap Value strategy, told the Sarasota City pension board the firm’s portfolio underperformed the Russell 2000 Value benchmark in the fiscal year that ended Sept. 30, 2025.
Frontier reported the portfolio produced 5.8% growth (4.7% net) for the fiscal year compared with 7.9% for the Russell 2000 Value benchmark, and the manager said that was driven largely by the market’s preference during the period for lower‑quality, speculative names the strategy tends to avoid. Frenzhuel said the portfolio’s long‑term record remains strong: since inception he reported a 12.4% annualized net return.
The manager highlighted contributors and detractors. Industrials were the biggest positive contributor, led by a semiconductor‑supply instrument provider he listed among the top performers that returned roughly 190% over the period. The largest drags were in healthcare (about a three‑percentage‑point headwind) and energy (about 2.2 points), with one healthcare holding (named in the presentation as Cordero) down roughly 53% because of a weaker respiratory season that reduced demand for its rapid diagnostic tests.
Frenzhuel said that through April 30 of the current fiscal year the portfolio had rebounded: he reported a 19.4% growth return (18.6% net), roughly in line with the Russell 2000 Value at about 18.8% for the same period. He told the board that the firm’s multi‑decade, stock‑selection process reduces turnover (33% trailing 12‑month turnover) and explains performance differences in speculative market environments.
Board members asked about recent rotation between speculative and quality names. Frenzhuel said Frontier began seeing rotation toward higher‑quality, earnings‑producing companies in October, but May’s market action briefly favored lower‑quality, no‑revenue names again.
The board thanked Frontier for the presentation and moved to its next agenda item. The presentation was followed by a brief question‑and‑answer session with the board’s investment advisors.
