Market & Exchange Rate Risk
Market and exchange rate movements can cause the value of an investment to fall as well as rise and you may get back less than originally invested.
Gearing is a method used to increase the exposure of the investment company to financial markets through the use of loans. Gearing may lead to large and sudden movements in the value of the investment company.
Derivatives create leverage and may cause movements in the value of the underlying investments to amplify gains or losses to the investment company.
Counterparties to derivatives contracts with the investment company may become insolvent and default on their obligations, which may cause losses to the company.
The investment company may invest in a limited number of companies. This may cause the value of the investment company to be more volatile than a broadly diversified investment company.
Emerging Market Risk
The investment company may invest in countries that carry higher political, legal, economic and liquidity risks than investments in developed countries. This may result in large fluctuations in the value of the investment company.
Smaller Companies Liquidity Risk
The investment company may invest in smaller companies which may be less liquid than larger companies. If large numbers of sellers suddenly seek to sell a less liquid stock, the price may be driven down further than in the case of a more liquid stock, resulting in fluctuations in the value of investments held by the investment company.
Share Price Risk (Unit Value)
The share price of an investment company may differ from the Net Asset Value due to the level of supply and demand for units. A high level of supply may result in the price of the investment company trading below the Net Asset Value.