Risks and Commitments
Important Risks and Commitments
You need to be aware you could lose all or some of the money you invest.
All investments made available on the Wealth Club website are generally considered to be higher-risk and long-term commitments. You should not invest money you cannot afford to lose.
Wealth Club offers a non-advisory service to Sophisticated and High Net Worth Investors. We do not give personal investment advice or recommendations.
The investments we offer are not suitable for all investors. If you have any doubts as to the suitability of a particular product, or the product class in general, or require advice of any kind, you should seek professional advice.
Please carefully read and make sure you understand the risks and other information contained within the Investment Documentation (Prospectus, offer document or information memorandum, plus the Key Information Document where available) for the product you have chosen, together with Wealth Club’s Terms of Business (link in footer). Note, new risks may arise in the future which could not have been anticipated in advance.
Past performance is not a guide to future performance.
Diversification is important. Spreading your money across multiple investments, rather than concentrating your investment in a small number of products or companies, means you should spread risk and increase the chance of an overall return on your investments.
The value of investments and the income from them can fluctuate and may fall and may be affected by economic factors such as changes in interest rates or inflation. Dividends are variable and not guaranteed.
Tax rules change. The tax treatment (and where applicable, tax reliefs) will depend on your individual circumstances.
You should carefully consider charges. Initial charges, other up front and ongoing costs and performance fees will reduce the value of your investment.
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
• Private market investments
• Managed portfolios
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 invested 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 very small companies is increased as the risk of failure is higher.
The sale price achieved for these investments and the timing of any such realisation may be influenced by a large number of factors.
You should invest only a limited proportion of your available investment funds in start-up and growth-stage companies and should balance these investments with relatively safer, more liquid investments with a more predictable return.
Investments in smaller unquoted companies will generally not be publicly traded or freely marketable. Investments listed on AIM are volatile and illiquid and there will most likely be a big difference between buying and selling price. The price could be subject to rapid fluctuations in value. The underlying unlisted investments in these products are illiquid. The secondary market can be restricted and performance information that affects price is less readily available. In order to sell shares or other securities, there must be a willing buyer for such shares at an acceptable price. Consequently, it might be difficult to realise an investment.
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 all of these as 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.
Smaller funds or portfolios may be less diverse (increasing risk) and prove costlier to manage. In a fund or portfolio, if the fund size is smaller than envisaged, fixed costs will have a greater impact on performance.
For VCTs, EIS, SEIS and IHT, the charges may be greater than for other more mainstream investments. For example, dealing costs incurred by the investment manager to trade in underlying investments may be significant.
If a VCT, EIS or SEIS does not reach its minimum investment level, it may not go ahead and your application will be returned. This could pose potential tax planning issues near the end of a tax year, as well as the money having been tied up without being invested.
VCT, EIS and SEIS fund managers may not allot shares as quickly as anticipated, which may affect the tax year in which any tax reliefs are available.
Past UK Government Budgets have changed company size and type criteria for meeting VCT, EIS and SEIS investment eligibility requirements. Investors should be aware such amendments may alter the underlying risk profile of current offers relative to previous years’ offers in which they invested.
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.
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.
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.
Some private market offers are only available to clients who qualify as Elective Professional Clients of Wealth Club.
Private markets investments may invest in companies or instruments which are denominated in currencies other than sterling, so are exposed to currency fluctuations.
They can be difficult to price and value. Investments may be valued based on estimated prices and therefore subject to potentially greater pricing uncertainties than listed securities.
They are sensitive to changes in the global economic outlook. An economic slowdown or drop in investor confidence is likely to impact the value of private market investments.
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. 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).
The performance of the portfolio will depend significantly upon the ability of the manager to select profitable investments: there is no guarantee this will happen.
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 equities and so will be exposed to currency movements.
Overseas equities may be subject to withholding taxes or other taxes imposed by the jurisdiction in which an equity is issued. Such taxes may not exist at the time that an investment is made but may 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.
The portfolio may be concentrated: this will increase risk.
The underlying portfolio assets will be held on your behalf via a custodian. You should read the Investment Documentation carefully to familiarise yourself with the details and particular risks.