Investors in the Scheme are advised that all investments in mutual funds and securities are subject to market risks. Risks include but are not limited to:
Market Risk
Market risk involves the possibility that the value of the Scheme’s investments in stocks shall decline due to drop in the stock market. In general, the value of the Scheme shall move in the same direction as the overall stock market, which shall vary from day to day in response to the activities of individual companies and general market and economic conditions. This risk shall be mitigated to some extent by detailed fundamental analysis of the investee companies and changing asset allocation depending upon the overall market and economic situation.
Value Stocks Risk
Value stocks are subject to the risk that their intrinsic value may never be realized by the market or that their prices may go down. While the Scheme’s investments in value stocks may limit its downside risk over time, the Scheme may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. This risk shall be mitigated by limiting the exposure to value stocks to a manageable level.
Credit Risk
The Scheme shall be placing funds in Banks to manage liquidity. There are risks that the Bank may not be able to meet its obligations. The Management Company shall carefully evaluate the financial position of the Banks before placing any funds with those Banks.
Government Regulation Risk
Government policies or regulations are more prevalent in some sectors than in others. Schemes that invest in these sectors may be affected due to change in these regulations or policies, which directly or indirectly affect the earnings and / or the cash flows, and / or any governmental or court orders restraining payment of capital, principal or income.
Liquidity Risk
Some securities have limited market floats and hence are not actively traded in the secondary market or they may generally have a relatively issue size. Investments in securities issued by such companies may be difficult to trade that may cause the value of the Scheme to rise or fall substantially as any buying or selling of such securities may impact its prices.
Voluminous Purchase / Redemption of the Scheme Units Risk
Any significant transaction made by an investor could significantly impact the Scheme’s cash flow. If the investor(s) buys a large number of Units of the Scheme, the Scheme may temporarily have a high cash balance. Conversely, if the Unit Holder(s) redeems a large number of Units, the Scheme may be required to fund the redemption by selling securities at an inopportune price. This unexpected sale may have a negative impact on the performance of the Investment.
Other Risks Involved
- Mismanagement of the investee company, third party liability whether through class action or otherwise or occurrence of other events such as strikes, fraud etc., in the company in which the investment is made.
- Breakdown of law and order, war, terrorist activity, natural disasters etc.
- Senior rights of some creditors over other creditors in the event of winding up.
The Management Company shall adopt a risk management framework under which it can, among other things, diversify the Scheme’s portfolio and alter the various types of Investments depending on market conditions. The Management Company shall introduce adequate safeguards for controlling the risks in security selection and portfolio construction process.
