Prospective investors should consider (among other things) the non-exhaustive list of risks provided below, carefully and in their entirety assess the subscription form and related documents, consult and seek advice from their professional investment and legal and tax advisers, and conduct their own research into the risk factors associated with the proposed investment in the Fund and then rely on this research.
RISKS RELATING TO THE FUNDS
There are financial risks associated with investing in Units. Investors should be aware that the market price of the securities in which the funds take positions may fluctuate. An investment may exhibit an unfavourable value development as a result of the development of the relevant stock markets, caused for example by business-specific developments or general economic developments in Europe and / or abroad. Stock markets have generated favourable returns in the past. However, this offers no indication or guarantee for the future. There is a risk that the entire market or a category of investments will fall in value, affecting the price and value of the investments. Due to currency fluctuations, the Net Asset Value of the funds may also be subject to fluctuations, which may mean that Unit holders will not receive their full investment back upon termination of their participation.
The funds and the Fund Manager do not provide any guarantee in the event of losses on an investment. Hence, Unit holders run the risk of losing some or all of their investment in the funds.
Liquidity risk of investments
The funds will in fact be invested in shares of companies with a smaller market capitalization. These generally have a lower daily trading volume on the stock exchange than shares of companies with a larger market capitalization. As a result, there is the risk that, if a large number of outstanding Units is offered for redemption, positions in the portfolio cannot be reduced in time at a reasonable price.
As investments will only be made in a limited number of companies, this can lead to greater fluctuations in the Net Asset Value of the funds than if more diversified investments were made. The strategy of the funds may cause the performance to deviate significantly from the MSCI World Equity Index. This creates specific risks, which may be reflected in significant differences in the performance of the funds and the world stock index, in both positive and negative directions. This also includes sector risk – i.e. a concentrated exposure to a limited number of sectors in the investment portfolio. The price development within those sectors may deviate from the average price development on the stock exchange.
There is a risk that an Ecological, Social or Governance (ESG) event or circumstance could occur that could have a material adverse effect on the value of the funds:
Concrete sustainability risks are:
- greenwashing: this is the risk that the funds will be promoted as sustainable, while this is insufficiently founded. This can lead to a loss of reputation for the funds and the Fund Manager.
- investing in non-sustainable companies: this is the risk that there will be a negative effect on the value of the funds because of a negative value development of the underlying investments as a result of events in the field of ESG.
Risks of economic, political and general nature
Investments from the funds are subject to risks of a general economic nature, such as decline in economic activity, rise in interest rates, inflation and rise in commodity prices. The value of the investments of the funds may also be affected by political developments, changes in tax policy, changes in regulations or events such as natural disasters, wars and terrorist activities.
There is no guarantee that the desired return targets will be achieved. The risk that the pursued return targets will not be achieved may vary, based on the choices available under the investment policy. There are no guarantees from third parties that the pursued return targets will be achieved. No guarantee can be given that the Fund Manager’s analyses of expected developments in the short or longer term are correct. If the Fund Manager misjudges the value development of an investment of the funds, this may result in a loss to the funds if the market value of a purchased investment falls.
Developments in financial markets
There is a risk that Euronext Amsterdam, Euronext Brussels and / or Deutsche Börse / Xetra or certain sectors will fall in value as a result of a negative economic outlook, unfavourable development of the foreign currency or other messages that could have a negative impact on market sentiment. As a result, the value development of the shares which have been invested in is also expected to be negatively affected, which will lead to a decrease in the value of the Units.
Dividends and interest received by the funds, as well as capital gains, are not distributed but reinvested. No profit distributions are made by the funds. By redeeming Units there is the potential risk of erosion of the assets of the funds if at any time more Units are redeemed by the funds than issued.
There is a risk that the parties involved and / or third parties will not perform, or will not perform on time or in accordance with the expectations and / or agreements made. For example, there may be a default in the performance of its obligations by a counterparty as a result of a deterioration in its financial situation or for other reasons.
The funds don’t not hedge currency positions. Investments other than in € can therefore cause fluctuations in the Net Asset Value of the funds, both positively and negatively.
Inflation can cause the relative value of a Unit to fall. The funds don’t not hedge inflation risk and don’t not take any other measures to reduce this risk.
This is the risk that the value of the investments will change as a result of interest rate developments. This concerns both the value movements of the securities and the positive or negative returns from the uninvested cash.
This is the risk that settlement via a payment system does not take place as expected, because the payment or delivery of the financial instruments by a counterparty does not take place, is not done on time or is not as expected.
Risk of loss of deposited assets
In the event of insolvency, negligence or fraudulent acts of the Depositary, the Legal Owner, the Custodian or a sub-custodian, there is a risk of loss of deposited assets.
Risk of (fiscal) legislative changes
This is the risk that the tax treatment of the funds will change in a negative sense, or that other legislation will be enacted that has a negative impact on the funds and the Unit holders.
Short positions (only EV Smaller Companies Fund)
In theory, the possible loss on these positions is unlimited, while the possible profit cannot exceed the invested amount.
Derivatives (only EV Smaller Companies Fund)
It will be possible for the fund to use quoted derivatives in order to protect positions taken. These products can behave in a volatile manner, which means their use can have great impact (both positive and negative) on the value of the fund.
Leverage effect (only EV Smaller Companies Fund)
The fund can invest with borrowed money (leverage) up to 25% maximum of the fund’s Net Asset Value. This can give rise to greater profits as well as greater losses (the so-called ‘leverage effect’). This means that the fund’s Net Asset Value could become negative and result in the bankruptcy of the fund. There will also be interest charges.
RISKS RELATING TO THE FUND MANAGER
Dependence on (persons employed by) the Fund Manager
The investment policy is implemented by (persons employed by) the Fund Manager. There is a risk that persons indispensable to the implementation of the investment policy will leave, be unavailable for a lengthy period of time or will disappear permanently. This could have negative consequences for the continuation of the funds.
There is a risk that the continuity of the Fund Manager will be threatened, because the funds it manages decrease in size and / or costs arise because the environment changes (developments in the financial markets, cyclical fluctuations, changed needs of (potential) investors in the funds, competition, stock market crashes, rapidly-changing regulations). All of this can have a negative effect on the continuity of the funds.
Operational risk Fund Manager
This concerns the risks of damage due to the failure or inadequacy of internal processes, human and technical shortcomings. This includes shortcomings in the processes and information technology systems and the risks of cybercrime.
The Fund Manager has outsourced a number of services to third parties. This mainly concerns the fund administration, including the associated IT systems. There is a risk that the parties to whom these activities have been outsourced will not (properly) fulfil their obligations, which will jeopardize the continuity and / or quality of the outsourced activities and / or cause damage.
This concerns the risk of damage to the reputation or threat to assets/results as a result of inadequate compliance with laws and regulations. This may endanger the continuity of the Fund Manager. Compliance risk also includes the risk of money laundering, terrorist financing and circumvention of sanctions legislation. This also concerns the risks of conflicts of interest, market manipulation, corruption and use of inside information. Finally, this includes the risk of internal or external fraud and the risk of non-confidential handling of personal data.
Insolvency, Negligence and Acts of Fraud
In the event of insolvency, negligence or fraudulent acts on the part of the Fund Manager, its directors or employees or third parties engaged for the custody of assets of the funds, the value of Units may fall and assets deposited in custody may be lost.
RISKS RELATING TO THE LEGAL OWNER, THE DEPOSITARY AND THE CUSTODIAN
Insolvency, Negligence and Acts of Fraud
In the event of insolvency, negligence or fraudulent acts of the Legal Owner, the Depositary and the Custodian, their directors or employees or third parties engaged for the custody of assets of the funds, the value of Units may decline.
RISKS OF CONFLICTS OF INTEREST
The Fund Manager and / or persons or entities affiliated with it can or will manage or advise clients other than the funds. There can be no assurance that such services will not conflict with the interests of the funds. While the Fund Manager and the Legal Owner intend to manage potential and actual conflicts of interest matters in good faith and in accordance with the conflict of interest policy of the funds, there can be no assurance that such conflicts of interest will be resolved in the interest of the funds.
Diverse range of Unit holders
Unit holders may have conflicting investment, fiscal or other interests with regard to their investments in the funds. The conflicts of interest may be related to, among other things, the nature of the assets of the funds, the structuring of the assets of the funds and the timing of the sale of the assets of the funds. As a result, conflicts of interest may arise in connection with decisions of the Fund Manager that are more beneficial to one Unit holder compared to another Unit holder, in particular with regard to the individual tax situation of a Unit holder. The Fund Manager will take into account the investment, tax and other interests of the funds and the Unit holders as a whole, and not the investment, tax or other interests of an individual Unit holder.
The above list of risk factors is not exhaustive and is not intended to be a complete explanation of all risks and considerations associated with an investment in the funds. The performance of the funds may be affected in particular by changes in market conditions and legal, regulatory and tax requirements. Regardless of the level of profitability, the funds will be responsible for paying the relevant fees, charges and expenses detailed in the Prospectuses.
Potential Unit holders who have any doubts regarding the risks inherent in investments in the funds are advised to seek independent financial advice before investing in the funds.