The dynamic nature of the downside protection means that the Fund may lag the market in times of rapid market recovery, because the Fund may be largely invested in cash for extended periods of time. Large investments in cash will mean that upside may be limited if markets subsequently rise. As a result, keeping the Fund open may no longer be in the best interest of shareholders and, at this stage, the Manager could consider winding up the Fund.
The Fund aims to provide the 80% protection by gradually switching from the investment portfolio to a cash portfolio when markets fall. As a further level of security the Fund will invest in a derivative contract with a single counterparty. Where this arrangement fails to support the protection level, the Fund will only be relying on its cash allocation policy to provide the protection. Where the Fund is unable to find a suitable counterparty to enable at least 80% of the value of the Fund to be protected or where only allocation to cash is feasible, the Fund may have to be closed with the proceeds returned to investors. There is a risk that the Fund may hold large proportions of cash for considerable periods of time. This may lead to the Fund underperforming those markets where it is usually expected to invest.
The value of investments, and any income generated from them, can fall as well as rise. Where charges are taken from capital, this may constrain future growth.
Past performance is not a reliable indicator of future results. If any currency differs from the investor's home currency, returns may increase or decrease as a result of currency fluctuations.
Investment objectives and performance targets may not necessarily be achieved, losses may be made.
Specific fund risks
Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income.
Derivative counterparty: A counterparty to a derivative transaction may fail to meet its obligations thereby leading to financial loss.
Derivatives: The use of derivatives is not intended to increase the overall level of risk. However, the use of derivatives may still lead to large changes in value and includes the potential for large financial loss.
Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. bankruptcy), the owners of their equity rank last in terms of any financial payment from that company.
Fund closure: Where the Fund is unable to find a suitable counterparty to enable at least 80% of the value of the Fund to be protected or where only allocation to cash is feasible, the Fund may have to be closed with the proceeds returned to investors.
Government securities exposure: The portfolio may invest more than 35% of its assets in government securities issued or guaranteed by a permitted single state.
Interest rate: The value of fixed income investments (e.g. bonds) tends to decrease when interest rates and/or inflation rises.
Large cash holding: There is a risk that the Fund may hold large proportions of cash for considerable periods of time. This may lead to the Fund underperforming those markets where it is usually expected to invest.
Protected value: Whilst the Fund will endeavour to protect at least 80% of its value at all times this is not guaranteed.