Explain "asset allocation" in the context of trust management.

In the context of trust management, asset allocation refers to the process of distributing investments among various asset categories such as stocks, bonds, cash, and alternative investments. This strategic approach helps to balance risk and return, aligning the trust's investments with the financial goals, risk tolerance, and time horizon of the trust and its beneficiaries.

By diversifying investments across different asset classes, a trustee can mitigate the impact of market volatility and enhance the overall performance of the trust. Effective asset allocation is crucial as it helps in achieving optimal returns while managing risks—key considerations in fiduciary responsibilities.

The importance of different types of investments and their respective roles in the portfolio can influence how well the trust meets its objectives, whether that’s generating income for beneficiaries, preserving capital, or aiming for long-term growth. This makes asset allocation a cornerstone of investment strategy within trust management.