Taking a long-term investment approach, like we do at Seed, can often be quite a frustrating experience. We believe that this frustration is the reason that many peolpe make short term decisions.

The first question that naturally comes from the above statement is, "What is the long term?" Long term can described as long enough for valuations to play a meaningful role in the investment result, or a full investment cycle. This is typically between 5 and 7 years, but will vary from cycle to cycle. It is for this reason that we like to measure performance over longer periods rather than making decisions on monthly or even annual results.

Managing a portfolio of investments with long time horizons will generally mean that a small percentage of ideas are either being confirmed or invalidated on a monthly basis. Over the short term the ratio of good to bad decisions will be random. Over the longer term, performance will be determined by the quality of the managers - and by extension the ratio of their successful to inferior decisions.

It is the short term (less than 3 years) periods where, by chance, the ratio of bad decisions is high that prevents many market participants from taking a long term view. We aim to avoid this trap by continually developing and improving solid valuation tools to assist our long term investment process.

During March Seed was given clearance to increase the offshore exposure to 25% of the Fund - in line with changes in the legislation that regulate retirement investments. As the Seed Flexible Fund is a Regulation 28 compliant Fund it needs to comply with this legislation to remain a suitable vehicle for retirement funds and investments.

Exposure to global assets was increased during the month from 21% to 24% and ended the month at just over 23% of the Fund. The exposure to global assets is highly skewed towards high quality equity - over 90% of the global exposure is allocated to global equity.

A recent addition to the Fund was a 2.6% investment into the Foord Compass Ltd Debenture. The company investments, managed by Foord Asset Management, seek to outperform inflation by 10% per annum. The listed debenture invests for the long term and seeks to protect capital over any 1 year period. The debenture gives investors access to Dave Foord's considerable fund management skills in an unconstrained mandate.

The debenture has an excellent 9 year history of protecting capital over rolling 12 month periods and beating its tough inflation target.

The allocation to the Foord Compass Ltd Debenture has been categorised as Local Protected Equity alongside the New Gold Issuer Ltd Debenture.

Regular readers of this fact sheet will in all likelihood notice that the positions and comments are fairly similar from month to month. This is a result of our long term approach to investing. Our views don't change that frequently and focusing on short term market movements will only serve to distract our long term mindset.

During December we met up with the Cannon (local equity) and Atlantic (local fixed income) managers to get an update on their views and current positioning.

The local equity allocation remains in shares with great valuation characteristics that should provide the portfolio with a better return profile than the ALSI going forward. The dividend yield of the local equity component sits at 2.8% versus the ALSI's 2.2%, while the PE of the local equity component is 12 compared to the ALSI's 17.2 (over 30% cheaper than the market). These are compelling metrics.

Atlantic remain weary of longer dated bonds given that yields and interest rates, both locally and abroad, are at historic lows. Their current strategy involves taking tactical short term - positions in longer duration assets when relative value is presented. Atlantic has also increased the property holding to 9.8% of their allocation (up from 5.9% a month ago).