ll investment involves risk. Forecasting the future is a notoriously difficult thing to achieve; so it is no surprise that those whose job it is to predict events accurately - politicians, economists, investment managers - are all held in jovial contempt.

The investment management industry has sought to protect itself from this difficulty by holding out the promise of an investment performance which compares favourably with the relevant stockmarket indices. This is perhaps a satisfactory test when the managed funds do not appear to belong to anyone, but it bears little relationship to the hopes and fears of real people who want to preserve their assets, savings or pensions come what may, and to see them grow over the course of time. In short, they want absolute performance, but fund managers are shy of holding out such a promise because there are times when this is very hard to achieve.

Ruffer LLP is trying to achieve this nevertheless. An involvement with a 10% risk free real return in a year is always a good investment, even if the index goes up 25%. A growing, successful smaller company will make an investor money even if there are extended intervals when it 'underperforms' in stockmarket terms. We try to find these companies and, when we do, we invest in them. By contrast, we can see little point in investing large sums of money in a company whose sole virtue seems to be that it is a major constituent of an index against which the manager is judged. Those who track the index cannot afford this luxury.

Perversely, by concentrating on absolute performance, it is easier to achieve a good comparative performance as well. The underlying realities of the world take on a greater significance than the next 'market move' - and the ultimate key to investment is to identify what is going on in real life rather than on the computer screens of the top thousand traders.