Risk Information
Key risks
No return / income guarantee
The returns and income from a fund depend on the positive performance of the underlying assets in which the fund is invested. The amount of distributions and the market value of the shares in a fund can therefore go up or down depending on the performance of the fund assets. It cannot be guaranteed that any particular return or income targets are actually met, or indeed that any positive returns or income are generated at all.
Investment risk · “Blind pool” risk
A fund will not or not completely be invested in target investments at the time of its final closing; in other words it constitutes a “blind pool” of capital. Investors must therefore assume that at the time their commitment is accepted the fund still has to invest in suitable assets. However, when making its investments the fund competes with other companies, financial institutions and institutional investors. No assurance can be given that the investment programme will find a sufficient quantity of suitable investment assets. There is no guarantee that it will be possible to identify suitable investment assets, especially if the macroeconomic environment and/or other market conditions change after the fund is
launched This may mean that the fund is unable to invest or only able to invest less in suitable target assets, which may ultimately lead to a lower absolute volume of distributions from fund assets.
Risk of insufficient diversification
A fund may only make a limited number of investments. Below-average earnings from just one portfolio investment may therefore have a significant impact on the average return from the fund. In addition, the portfolio investments held by the fund may exhibit the same risk factors, so if these risks materialise they may have far-reaching adverse consequences on the overall performance of the fund.
Cost risk
The costs of acquiring, disposing of and managing fund assets may be higher than planned, if new types of expense arise, for example, or if the amount of planned or known costs is higher than expected.
Interest rate risk
To the extent that a fund invests directly or indirectly in debt instruments it is exposed to interest rate risk. This is particularly the case if the vehicles for the investments are structured using debt instruments. If market interest rates or the borrower’s individual risk premium should rise (a difference known as the “spread”), the value of these instruments may fall.
Exchange rate risk
To the extent that a fund holds assets in a foreign currency that differs from the reference currency or accounting currency of the fund or the respective share class, it is exposed to foreign exchange risk. Any decline in the value of the foreign currency against the reference or accounting currency would cause the value of the assets denominated in the foreign currency to decline.
Effect on returns of sustainability risks
Sustainability risks may have an influence on the fair value and liquidity of the assets held by the respective funds directly and indirectly via investment vehicles, and so on the fund returns. This may result in write-downs up to and including a total loss.
Hedging risk
To the extent that a fund enters into transactions to acquire (derivative) financial instruments for hedging purposes, the potential rewards are generally offset by significant risks, which may increase if borrowing is used to satisfy obligations under hedging transactions.
Fungibility of interests in a fund
Interests in a fund may not be returned. They are typically also not publicly traded and so can generally only be sold during the lifetime of the investment at a substantial discount to market and/or book value. It is not certain that a reasonable market for interests in a fund will develop. The assumption must therefore be that capital will be committed for a long period and it must not be assumed that the fund interests can be transferred to a third party in time and at their original value in the event of any impending losses or negative performance by the fund.
Market price and counterparty risk for fund interests | Risk of total loss
The market values of a fund interests may be subject to considerable volatility as a result of changes in macroeconomic factors and/or other market conditions. Furthermore, these factors may mean that the fund becomes insolvent or over-indebted. As a result these factors may mean that a fund interests have to be written down or written off in full if their market values are permanently impaired. An investment in a fund is therefore only suitable for investors that could sustain the loss, up to and including a total loss resulting from any unexpected negative performance. However, the planned diversification of a fund’s investment portfolio means that a total loss would only be incurred if the vast majority of directly or indirectly held assets had to be written off.
Risk of inability to exert an influence over the managers of the assets
Investors do not hold a direct interest in the portfolio assets and so have no or only a very limited ability to exert an influence over their managers. Furthermore, as a minority shareholder or lender that is not entitled to manage the assets, a fund itself can only exert a limited influence over the managers of the assets. Investors and the fund can therefore neither directly nor indirectly exert a decisive influence over decisions taken by the managers of the assets. Poor decisions by the managers may result in losses for the assets or the fund, particularly if distributions by portfolio investments do not occur or are reduced, and/or if the proceeds of disposing of shares or other rights to the portfolio investments do not occur or are reduced, which would ultimately mean that the fund makes no or lower distributions to its investors.
General tax risk
Since a fund will not or not fully be invested in portfolio assets at the time of its final closing, it is not possible to give a definitive opinion of the tax situation. The fund reviews the tax situation carefully, in cooperation with its tax advisers, before making an investment in a portfolio asset. However, it cannot be ruled out that the tax authorities in Luxembourg or the country in which the portfolio investment is based (investment country) come to a different opinion. The tax assessment of an investment may change, possibly also retroactively, particularly in terms of legislation, case law or administrative practice, until the assessment base and the final amount of taxable income have been determined. This may lead to higher taxation and levies on the investment asset, the fund and/or the investor.