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Asset Allocation

The asset allocation for our seven model portfolios is determined by the Asset Allocation Committee. This committee receives input from four sub committees, covering UK equities, fixed interest, pooled vehicles (funds and investment trusts) and ethical. All the committees include directors, investment managers and analysts and meet monthly as well as on an ad-hoc basis if required.

The Asset Allocation Committee draws on a wide range of economic, market fundamental and technical data to formulate a view on the relative value and future prospects of each asset class. It then sets the strategic and tactical investment policies for the seven model portfolios. Managing risk is central to this process, and we pay close attention to the volatility of different assets and how they are correlated. This helps us to blend them to produce portfolios targeted to the different levels of risk tolerance.

Within any individual asset class, the geographical and industrial sector weightings may be determined by the Asset Allocation Committee, whilst the stock and fund selection is delegated to the relevant specialist committees.

We believe asset allocation is central to long term investment success and asset classes often behave very differently from each other. Holding a diversified mix of assets helps to ensure that a portfolio is not over exposed to a single geographical area or industrial sector. It also means that if one area or sector falls in value, the asset diversification can help to prevent a disproportionate loss across the portfolio as a whole.