Arbitrage risk: Arbitrage is a technique which consists in benefiting from the differences in prices recorded (or anticipated) between markets and/or sectors and/or securities and/or currencies and/or instruments. If such arbitrage transactions perform unfavourably (a rise in sell transactions and/or fall in buy transactions), the funds net asset value may fall.
Counterparty Risk: When the fund carry out over-the-counter transactions (i.e. involving instruments not listed on the markets), they are exposed to a risk of default by the counterparty to the transaction.
Credit risk: It constitutes the risk that an issuer or a counterparty default. This risk includes the risk of changes in credit spreads and default risk. The level of credit risk is usually evaluated by using “ratings” representing a comparative assessment of the credit quality (solvency level) of an issuer, issuer or portfolio. “High Yield” investments present the lowest rating levels and therefore a high credit risk.
Currency risk: Funds may hold exposure to a currency different from its valuation currency. Changes in the exchange rate of this currency may negatively affect the value of assets in the portfolio.
Derivative risk: Derivatives are investments whose value depends on (or is derived from) the value of an underlying instrument, such as a security, asset, reference rate or index. Derivative strategies often involve leverage, which may exaggerate a loss, potentially causing the Sub-Fund to lose more money than it would have lost had it invested in the underlying instrument. Using derivatives may result in a higher portfolio volatility related to this underlying asset and an increase of the counterparty risk.
Emerging market risk: These markets are characterized by higher volatility issues and a lower liquidity because of legal, political and structural matters. Market movements can be stronger and faster on emerging markets than on “developed markets”, which can lead to a substantial decline in the net asset value in the event of the adverse movements relative to the positions taken.
Equity Risk: Some funds may be exposed to equity market risk through direct investment (through transferable securities and/or derivative products), meaning submitted to the positive or negative evolution of stock exchanges. These evolutions can be huge and be mainly driven by expectations relative to macro-economy and company results, speculation and irrational factors (including trends, opinions or rumours).
Inflation risk: Inflation risk is predominantly caused by sudden changes in supply and demand for goods and products in the economy, by rises in commodities prices and by excessive wage hikes. It is the risk of receiving payment in a depreciated currency and obtaining a rate of return lower than the inflation rate.
Interest rate risk: A change in interest rates, resulting notably from inflation, may cause a risk of losses and reduce the net asset value of the fund.
Performance risk: Performance risk arises from the level of exposure to other risks, the type of management (more or less active) and the presence or absence of a protection or guarantee mechanism. Volatility is one of the indicators of performance risk.
Risk of loss of capital: Investors are advised that any capital they invest is not guaranteed and that they may therefore not receive back the full amount invested. They may thus suffer a loss.
Sustainability Risk: The sustainability risk refers to any environmental, social or governance event or condition that could affect the performance and / or the reputation of issuers in the portfolio. It may be issuer specific, in line with their activities and practices, but may also be due to external factors.