Important Risks and Commitments
You need to be aware you could lose all or some of the money you invest.
Investments on the Wealth Club website are generally considered higher-risk and longer-term: they are not suitable for all investors. You should not invest money you cannot afford to lose. If your circumstances or objectives change, you should consider whether your investments remain right for you.
Wealth Club’s service is non-advisory and for Sophisticated and High Net Worth Investors. We do not give personal investment advice or recommendations. You should seek professional advice if you are unsure, including about the suitability of a particular product or product type for you.
Please carefully read and make sure you understand the risks and other information contained within the Investment Documentation (including Prospectus, offer document or Information Memorandum, and the Key Information Document where available) for the product you have chosen, together with the Terms and Conditions of the Wealth Club Services. Note, new risks may arise in the future which could not have been anticipated.
Diversification, spreading your money across multiple investments and investment types can help manage risks and increase the chance of an overall return on your investment. You should consider how much of your portfolio you are comfortable investing in higher risk and longer-term investments.
Past performance is not a guide to the future.
The value of investments and any income from them can fall as well as raise. Investment performance depends on a number of factors, including the performance of the underlying assets, sector or industry-specific factors, as well as wider factors such as changes in interest rates or inflation, price volatility, changes in regulation or economic shocks, particularly where the portfolio is concentrated.
Macroeconomic or geopolitical events – such as political instability, trade disputes, or shifts in investor sentiment – could also impact valuations, performance, or liquidity.
The value of investments in private companies could also be affected by the company issuing new debt or shares with greater rights or privileges.
Tax rules can change. The tax treatment (and any tax reliefs) depend on your circumstances.
You should consider charges carefully. Initial charges, other upfront and ongoing costs and performance fees will reduce the value of your investment. For some investments, the charges may be greater than for more mainstream investments. For example, dealing costs incurred by the investment manager to trade in underlying investments may be higher than for exchange-traded investments.
In many cases, investments are held on behalf of investors by a custodian or nominee and you should familiarise yourself with the details of this, if applicable.
The risks above, which are not exhaustive, are relevant to all investments available through Wealth Club.
Below we outline some of the specific risks for:
• VCT, EIS, SEIS, IHT portfolios, and single company private deals
VCT, EIS, SEIS, IHT portfolios, and single company private deals
Please read this section in conjunction with the risks that apply to all investments (above).
It is much more likely that you could lose your capital in an early-stage company than make a profit from it. These investments can be subject to sudden and large falls in value. The risk of investing in small companies and the risk of failure are higher.
Any underlying unquoted investments are illiquid and generally not publicly traded or freely marketable. Performance information that affects price is also less readily available. Consequently, it might be difficult to realise an investment and it make take a long time for realisations to occur. The sale price achieved for these investments and the timing of any such realisation may be influenced by a large number of factors. Where a service such an unquoted IHT portfolio offers the facility to sell shares to make a withdrawal, there must be a willing buyer for such shares at an acceptable price.
Investments quoted on AIM are volatile and illiquid and there is usually a significant difference between buying and selling price. The price could be subject to rapid fluctuations.
There is a limited secondary market for VCT shares. Certain VCTs may have buy-back policies in place. Any such buy-back policies are subject to liquidity and historically the directors of some VCTs have withdrawn buy-back policies or changed the level of the discount at which purchases have been made. Shares in VCTs typically trade at a discount to Net Asset Value (NAV). As the VCT distributes its realised capital gains the NAV, even when the VCT is successful, tends to decline to reflect the distribution during its lifetime. This affects pricing.
It is prudent to only invest a limited proportion of your investable capital in start-up and growth-stage companies and to balance these investments with relatively safer, more liquid investments with a more predictable return. If you invest in a single company there is no diversification if things go wrong.
Although the official minimum holding periods are 5 years for VCTs, 3 years for EIS and SEIS and 2 years for IHT portfolios to qualify for or retain some of the tax reliefs, you should consider these much longer-term investments.
Any amount withdrawn from an IHT portfolio will lose any BPR eligibility. Withdrawals from an IHT Portfolio may result in a Capital Gains Tax liability unless held in an ISA.
For tax-efficient investments, the underlying investee companies may lose their qualifying status if they do not comply with specific HMRC requirements throughout the relevant period. Tax relief could be delayed, denied or withdrawn.
Changes in tax or other government legislation could adversely affect the value of the VCT, EIS, SEIS or IHT portfolio. Other investment product types could become more tax efficient during the lifetime of your investment.
Applications for VCT, EIS or SEIS are not guaranteed to be accepted and may be returned, for instance, if the offer has not met its minimum fundraising target. This could pose tax planning issues near the end of a tax year. It could also mean your money is tied up for a period without being invested.
Smaller funds or portfolios may be less diverse (increasing risk) and prove costlier to manage. In some cases, if the fund size is smaller than envisaged, fixed costs may have a greater impact on performance.
If the allotment or purchase of shares is slower than anticipated this could affect the tax year in which any tax reliefs are available or when the investment begins to qualify for any IHT relief.
Past UK Government Budgets have changed company size and type criteria for meeting VCT, EIS and SEIS investment eligibility. Investors should be aware such amendments may alter the underlying risk profile of current offers relative to previous years’ offers in which they invested.
On IHT portfolios, although product providers operate the schemes with the intention that investors will qualify for IHT relief after holding the underlying shares for a two-year period, there is no guarantee that this will be achieved or maintained. BPR is assessed by HMRC on a case-by-case basis at the date of death. Some investments may include an insurance element. Where this is the case, investors should familiarise themselves with the conditions and exclusions of the policy before investing.
Risks – Private markets funds
Please read this section in conjunction with the risks that apply to all investments (above).
Private Markets investments, including real assets such as forestry, should not be considered readily realisable.
Only clients who qualify as Elective Professional Clients of Wealth Club can invest. Individual funds may also apply their own additional requirements and exclusions and you should review these carefully.
Private Markets funds may invest in companies or instruments denominated in currencies other than sterling, so are exposed to currency fluctuations. Where a hedged share class is used, the cost of hedging may impact returns.
The funds can be difficult to price and value. They may be valued based on estimated prices and therefore subject to potentially greater pricing uncertainties than listed securities.
Funds may specialise in more complex investments and/or use leverage, which can magnify positive or negative movements in value.
You must be comfortable with the potential for long periods of illiquidity. For semi-liquid funds, redemptions may be available on a periodic basis; however, net redemptions may be limited to a percentage of NAV, to manage liquidity. Some funds may levy an early redemption fee in the first few years (a soft lock). Private market investments may also reserve the right to charge for, suspend, or otherwise restrict redemptions under conditions of market stress.
Where applicable, realised capital gains may be subject to Capital Gains Tax. Income generated by a private market fund (whether distributed or not) will be published following its annual reporting period and should be declared on your tax return.
Risks – Managed portfolios
Please read this section in conjunction with the risks that apply to all investments (above).
Portfolio performance will depend significantly upon the ability of the manager to select profitable investments: this cannot be guaranteed.
A portfolio may have an indicator of risk/reward based on a target level of volatility. This is an objective and not guaranteed.
The liquidity of the portfolio will depend on the liquidity of the underlying holdings. It may not be possible to trade a fund or stock, for instance, in extreme liquidity conditions. Investment trust holdings could be impacted by movements in the discount or premium to NAV at which the trust trades. Such movements may be more likely at times of market stress.
Where a portfolio is managed by a single individual there is key person risk if that individual is unable to manage the portfolio for a prolonged period.
The portfolio may invest in overseas assets and so be exposed to currency movements.
Overseas equities may be subject to withholding taxes or other taxes imposed by the issuing jurisdiction. Such taxes may not exist when an investment is made and be introduced while the investment is held.
The portfolio may have exposure to smaller companies, which are more volatile and sometimes more difficult to trade or price than larger companies.
Concentration increases investment risk.