This page is intended to give you information on, and a warning of, the key risks associated with our investment products and services so that you are able to understand the most significant risks associated with the investment products and services being offered and, consequently, to take investment decisions on a more informed basis. You should consider this page carefully before deciding whether or not to invest in any of our investment products.
This page cannot disclose all the risks and other significant aspects of our investment products and services. You should satisfy yourself that you fully understand the conditions which apply to such investment products and services and the potential risk exposures. Different investment products have varied levels of exposure to risks and to different combinations of risks.
You must not rely on the guidance contained in this page as investment advice based on your personal circumstances, nor as a recommendation to enter into any investment service or invest in any investment product. Where you are unclear as to the meaning of any of the disclosures or warnings described below, we would strongly recommend that you seek independent legal or financial advice.
Collective Investment Schemes
These are also called ‘Funds’ and come in different structures, normally Open Ended Investment Companies (‘OEICs’) and Unit Trusts being the most common. Funds are structured arrangements that enable a number of investors to pool their money, in order to gain access to professional fund managers. Investments inside these funds can include but not limited to: shares, bonds, property, derivatives. Investments held by funds can focus on a single asset class or sector or can be also be made up of multiple asset classes in a single fund. The value of a fund, and the income derived from it, can decrease as well as increase and you may not necessarily get back the amount you originally invested. In addition, funds bear market risks, currency risk, asset/sector specific risk, insolvency risks and liquidity risks (see GENERAL RISKS SECTION below). You should ensure that you understand the nature of any fund before you invest in it. You can do this by making sure you read the Key Investor Information Document (which is made available to you for each fund) for a summary of the main risks.
Shares are issued by companies, large and small and linked to the value of a company. There are different types of shares such as (i) ordinary shares, which carry voting rights and may also pay a dividend; (ii) preference shares, which normally carry the right to a fixed dividend; and (iii) depository receipts, which represent ownership in a foreign issuer. Shares can be listed and traded on exchanges or can be privately owned. Shares carry varying risks brought about by global markets, interest rate, income and capital taxes, foreign exchange rates and liquidity. . The value of, or the income from shares can go up or down and you may not get back the original amount invested. .
Exchange Traded Funds (ETFs)
ETFs are investment funds which hold assets such as shares, bonds or commodities and which are traded on an exchange. ETFs normally have an objective to closely track the performance or have the constituents of a specific financial index. The value of ETFs can go up as well as down and you make not get back all the money originally invested. Some ETFs can rely on sophisticated investment techniques, and can sometimes hold riskier underlying assets, such as derivatives in order to achieve their objectives. Investors must always read the fund documentation to make sure that they completely understand the ETFs they are investing in, and the risks, before investing.
Bonds are debt that companies or governments issue in order to raise capital. They are also known as debt instruments. Bonds pay out a yield, each specified period, and then you get the initial amount invested, paid back at maturity of the bond. There is default risk with bonds, risk of the company or government issuer defaulting or going bankrupt before the maturity date, in which case the investor is unlikely to get the bulk of his money back. The likelihood of default is expressed in the credit rating of the issue and issuer. Credit Rating agencies such as S&P, Fitch and Moody’s provide a credit rating and the higher the quality of the rating, the less likely the rating agency feels the issuer will default in a certain amount of time. Bonds issued by major governments and companies are generally more stable than those issued by emerging markets or corporate issuers, and in the event of an issuer experiencing financial difficulty there may be a risk to some or all of the capital invested. .
Investment trusts are similar to funds in that they provide a means of pooling your money but they are publicly listed companies whose shares are traded on the London Stock Exchange. The price of their shares will fluctuate according to investor demand and changes in the value of their underlying assets. They will be subject to a combination of the risks associated with shares, bonds and funds in which they are invested. The value of investment trusts, or the income derived from them, can decrease as well as increase and you may not necessarily get back the amount you invested.
Some products are complex in nature and structure. Examples of these include Structured Products, Hedge Funds, Enterprise Investment Schemes, Venture Capital Trusts and Warrants There is no single definition for complex products but products that fit into this category include the following characteristics:
- the product is a derivative or has derivatives embedded in it;
- price, income, payout of the product is connected or linked to another asset (security/index);
- calculations for the price, value and/or payout can be bespoke;
- there is an actual or potential liability greater than the amount invested;
- there are limited opportunities to sell or onsell the product; or
- adequate comprehensive information may not be available on the product.
Because of the characteristics outlined above, complex products carry more risk of loss of your invested capital, and in some cases can carry unlimited potential losses. Understanding the risks of investments in these types of products is necessary before any investment. In some cases this category of investment may not be offered to some investors without undertaking further enquiries.
General Risk Types
The price or value of an investment will depend on fluctuations in the financial markets outside of the investment manager’s control. Past performance is no indicator of future performance.
The nature and degree of investment risks can vary depending on the country the investment is made in and could also vary from investment to investment. Investment risks will vary depending on the types of investments they are, depending on the location or domicile of the corporation/issuer or the concentration of the position in a portfolio. The general risks set out below could have an impact on each type of investment product or service.
Investments denominated in a currency other than that in which your account is denominated, a movement in exchange rates may have a favourable or an unfavourable effect value of your return and the value of your investment. Investments in developing or emerging markets are exposed to additional risks, including but not limited to higher inflation, more volatile exchange rate fluctuations, as well as macroeconomic and political factors.
Investment Manager Risk
Overall risk of poor performance of the fund manager managing funds held inside your portfolio as well as the overall poor performance of the manager of one of our products. This is the risk of loss from the poor performance of the fund managers in your portfolio as well as by us in the management of your managed or advised portfolio.
Investments in financial instruments within the global financial markets will carry a number of risks with the investment. These risks include price fluctuations depending on supply/demand and performance of the companies that make up the local indexes/exchanges as well as geopolitical and macroeconomic events.
Emerging Markets Risk
Investment in emerging markets are investments in those areas where the financial markets, governance, transparency, and regulations are likely to be not as developed or embedded as they would be in the developed markets. Risks include but not limited to the overall supply and demand for the investment, currency risk (as mentioned above), increased price volatility, local exchange requirements, as well as the geopolitical and macroeconomic risks.
There could be times when selling an investment in your portfolio could be difficult. This could be caused by several factors, including but limited to insolvency of the investment, adverse conditions in the stock market the investment is dealt on, selling restrictions placed by the fund managers of the funds you are invested in (examples of this include gating/lock up periods, notified periods of fund suspension/redemption).
Concentration/Sector/Asset Specific Risks
There are common risk factors relating to the geographical area, industry and/or asset type applicable to a particular investment product, particularly funds, such as:
- Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing.
- Targeted Absolute Return funds do not guarantee a positive return and you could lose some or all of your capital invested. Additionally, the techniques utilised by these funds may create leverage. Leverage means that the return or loss on an investment is subject to a multiplier increasing exposure to that investment and magnifying the volatility and risk of loss should the value of that investment decline. The use of leverage creates special risks and may significantly increase an investment’s risk. Leverage may create an opportunity for greater yield and total return but, at the same time, will increase the exposure of an investment to capital risk.
- Investment in smaller companies can be higher risk than investment in larger companies. The shares of smaller companies may be less liquid and their performance more volatile over short time periods.
- Investment in emerging markets may involve a higher than average risk due to the volatility of currency exchange rates, limited geographic focus, investment in a smaller number of issues, political and economic instability and less liquid markets.
- Funds which invest in a specific sector may carry more risk than those spread across several different sectors. In particular, gold, commodity, technology and other similarly focused funds can suffer as the underlying stocks can be more volatile and less liquid. In addition, the underlying assets in such funds can react, among other things, to economic factors such as changing supply and demand relationships, weather conditions and other natural events, the agricultural, trade, fiscal, monetary and other policies of governments and other unforeseeable events.
- Bonds issued by major governments and companies will be more stable than those issued by emerging markets or smaller corporate issuers. The value of a bond may fall in the event of a default or reduced credit rating of the issuer and there may be a risk to some or all of the capital invested. In addition, bonds are particularly affected by trends in interest rates and inflation. If interest rates go up, the value of capital may fall, and vice versa.
- Property investments can be relatively illiquid compared to bonds and equities and may be subject to significantly wider price spreads which could affect the valuation.
There is a risk that an investment may default or become insolvent or, that of any other brokers involved with your transaction/investment may become insolvent or default, which may lead to positions being liquidated or closed out without your consent. In certain circumstances, you may not get back the actual assets which you lodged as collateral and you may have to accept any available payments.