Almost all studies show that over 80% of value is added through asset allocation, with the balance coming from stock selection. In other words, the mix of stocks, bonds, cash and currencies has a greater impact on overall performance than individual securities selection. Diversification also reduces overall risk. Therefore, asset allocation needs to be actively managed, moving into markets that are out of favour and attractively priced and moving out of popular dearly priced markets.

We pride ourselves on being independent thinkers and are not afraid to stray from 'consensus' opinion. The trick to investing in the financial markets is to understand what the various markets are discounting and at what point the future has been fully discounted.

The Asset Allocation Committee (AAC) is responsible for the investment strategy of the Asset Management Service. The committee, comprising the three most senior Investment Directors at Ashburton, is very effective in that it provides an efficient forum in which differences of opinion can (and must) be reconciled and in which a cohesive and universal investment strategy can be hammered out. Strategy changes are triggered by a simple majority vote.

The committee maintains a constant dialogue in the form of informal meetings and 'open forum' discussions in the investment department to review investment strategy. The asset allocation does not remain static, it is always under scrutiny.

The remit of the committee is to analyse the global macro economic trends (the big picture or 'top down' view) and establish a long-term investment strategy. The shorter-term outlook is also analysed closely, particularly technical and sentiment indicators, in order to take advantage of short-term trading opportunities. Discussions are centred on The Five Tools of Investment.

The committee draws upon the views of all the investment managers in order to arrive at a detailed and formalised top-down view. This has the effect of harmonising the asset allocation process of the Asset Management Service, as it creates a common theme for bond, equity and currency investment, which then feeds into all other investment portfolios. It does not decide on individual stock selection, this being the responsibility of the individual investment mangers.

Each change in strategy is supported by an explanatory Strategy Note (typically written by the Global Investment Strategist), which is approved by an Investment Director and is subsequently posted to the Ashburton web site.