Risk Factors

Standard Risks:
  • Investment in Securities entails a high degree of risk and that there can be no assurance by the Portfolio Manager about returns thereon or even as regards preservation of capital. There is no assurance or guarantee that the objectives of the product will be achieved.
  • The Portfolio Manager does not provide any warranty (express or implied) as to the appreciation of the Securities of the Companies in which funds are invested by the Portfolio Manager. The Portfolio Manager shall not be liable in case of depreciation in the value of Securities in which funds are invested by the Portfolio Manager, or any indirect or consequential losses.
  • The past performance of the Portfolio/Portfolio Manager does not indicate the future performance or future performance of any other future products.
  • Every portfolio manager has a particular style of investing. In each business cycle the client will see both the merits and demerits of the strategy adopted. All strategies have some base assumptions which may or may not be right due to the external circumstances like monsoon, political developments, international events (terrorism/war/SARS, etc.) and hence it is understood that all strategies are best at any given point in time and can also be unsuccessful with external changes.
  • There are tremendous risks of having concentrated portfolios in either any sector/ company.
    Diversification of portfolio can always give safe returns to clients with a relatively lower degree of risks but such a strategy does not ensure a huge out performance.
  • Investment decisions made may not always be profitable.
  • Equity instruments by nature are volatile and prone to price fluctuations on a daily basis due to both macro and micro factors. Trading volumes, settlement periods and transfer procedures may restrict the liquidity of these investments.
  • The liability of the client shall not exceed his investment with Portfolio Manager.
Risks Associated with investing in Equities & Equity related Securities:
  • The value of the portfolio investments may be affected by factors affecting the securities markets such as price and volume volatility in the capital markets, interest rates, currency exchange rates, changes in law/policies of the government, taxation laws and political, economic or other developments which may have an adverse bearing on individual Securities, a specific sector or all sectors. Consequently, the portfolio value of the Product may be affected.
  • Equity Securities and equity–related Securities are volatile and prone to price fluctuations on a daily basis. The liquidity of investments made may be restricted by trading volumes and settlement periods. This may impact the ability of the client to redeem their portfolio.
  • The inability of the portfolio manager to make intended Securities purchases, due to settlement problems, could cause the Product to miss certain investment opportunities. Similarly, the inability to sell Securities held in the portfolio could result, at times, in potential losses to the investor, should there be a subsequent decline in the value of Securities held in the client's portfolio.
  • Securities which are not quoted on the stock exchanges are inherently illiquid in nature and carry a larger liquidity risk in comparison with Securities that are listed on the exchanges or offer other exit options to the investors, including put options. Though the portfolio manager is not intend to purchase/invest in any unlisted securities, the securities received upon corporate action like de–merger, amalgamation, etc. pending listing, the liquidity and valuation of the portfolio investments due to its holdings of unlisted Securities may be affected if they have to be sold prior to the target date for disinvestment.
Risks Associated with investing in Mutual Funds:
  • Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal.
  • As the price / value / interest rate of the Securities in which the Product invests fluctuates, the value of your investment in the Product may go up or down.
  • Mutual funds, like Securities investments, are subject to market and other risks and there can be no guarantee against loss resulting from an investment in the Product nor can there be any assurance that the Product’s objectives will be achieved.
  • Past performance of the Sponsor/AMC/Mutual Fund does not guarantee future performance of the Product
Risks associated with investing in money market instruments:
  • Investments in money market instruments would involve a moderate credit risk, i.e. risk of an issuer's inability to meet the principal payments.
  • Money market instruments may also be subject to price volatility due to factors such as changes in interest rates, general level of market liquidity and market perception of credit worthiness of the issuer of such instruments.
  • The value of the Product, to the extent that the Product is invested in money market instruments, will be affected by changes in the level of interest rates. When interest rates in the market rise, the value of a portfolio of money market instruments can be expected to decline.
Risks associated with investing in Derivatives:
  • The portfolio manager may invest in derivative products in accordance with and to the extent permitted under the Regulations. The use of derivatives requires an understanding of the underlying instruments and the derivatives themselves. The risk of investments in derivatives includes mispricing or improper valuation and the inability of derivatives to correlate perfectly with underlying assets, rates and indices.
  • Trading in derivatives carries a high degree of risk although they are traded at a relatively small amount of margin which provides the possibility of great profit or loss in comparison with the principal investment amount.
  • The portfolio manager may find it difficult or impossible to execute derivative transactions in certain circumstances. For example, when there are insufficient bids or suspension of trading due to price limits or circuit breakers, the portfolio may face a liquidity issue.
  • The option buyer's risk is limited to the premium paid, while the risk of an option writer is unlimited. However, the gains of an option writer are limited to the premiums earned. Since in case of the portfolio all option positions will have underlying assets, all losses due to price–movement beyond the strike price will actually be an opportunity loss.
  • The relevant stock exchange may impose restrictions on exercise of options and may also restrict the exercise of options at certain times in specified circumstances.
  • The writer of a put option bears the risk of loss if the value of the underlying asset declines below the exercise price. The writer of a call option bears a risk of loss if the value of the underlying asset increases above the exercise price.
  • Investments in index futures face the same risk as investments in a portfolio of shares representing an index. The extent of loss is the same as in the underlying stocks.
  • The portfolio bears a risk that it may not be able to correctly forecast future market trends or the value of assets, indexes or other financial or economic factors in establishing derivative positions for the portfolio.
  • The risk of loss in trading futures contracts can be substantial, because of the low margin deposits required, the extremely high degree of leverage involved in futures pricing and the potential high volatility of the futures markets.
  • Derivative products are leveraged instruments and can provide disproportionate gains as well as disproportionate losses to the investor. Execution of such strategies depends on the ability of the fund manager to identify such opportunities. Identification and execution of the strategies to be pursued by the fund manager involves uncertainty and the decision of fund manager may not always be profitable. No assurance can be given that the fund manager will be able to identify or execute such strategies.
  • The risks associated with the use of derivatives are different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments.
  • As and when the portfolio manager trades in derivative products, there are risk factors and issues concerning the use of derivatives that investors should understand. Derivatives require the maintenance of adequate controls to monitor such transactions and the embedded market risks that a derivative adds to the portfolio.
  • Besides the price of the underlying asset, the volatility, tenor and interest rates affect the pricing of derivatives. Other risks in using derivatives include but are not limited to:
    • Credit Risk: This occurs when a counterparty defaults on a transaction before settlement and therefore, the portfolio manager is compelled to negotiate with another counterparty at the then prevailing (possibly unfavourable) market price, in order to maintain the validity of the hedge.
    • Market Liquidity Risk: This is where the derivatives cannot be sold (unwound) at prices that reflect the underlying assets, rates and indices.
    • Model Risk: This is the risk of mis–pricing or improper valuation of derivatives.
    • Basis Risk: This is when the instrument used as a hedge does not match the movement in the instrument/ underlying asset being hedged. The risks may be inter–related also; for e.g. interest rate movements can affect equity prices, which could influence specific issuer/ industry assets.
Risks associated with Securities Lending:

The risks in lending portfolio Securities, as with other extensions of credit, consist of the failure of another party, in this case the approved intermediary, to comply with the terms of the agreement entered into between the lender of Securities, and the approved intermediary. Such failure to comply can result in a possible loss of rights in the collateral put up by the borrower of the Securities, the inability of the approved intermediary to return the Securities deposited by the lender and the possible loss of any corporate benefits accruing to the lender from the Securities deposited with the approved intermediary. The portfolio manager may not be able to sell such Securities and this can lead to temporary illiquidity.

  • The portfolio manager or its associates are not responsible or liable for any loss or shortfall resulting from the operation of the Portfolio.
  • Before investing, prospective investors should review/ study this Disclosure Document carefully and in its entirety and shall not construe the contents thereof or regard the summaries contained therein as advice relating to legal, taxation or financial/ investment matters. Investors should consult their own professional advisor(s) as to the legal, tax or financial implications resulting from (i) Subscription, gifting, acquisition, holding, disposal (by way of sale, switch or Redemption or conversion into money) and (ii) to the treatment of income (if any), capitalization, capital gains, any distribution, and other tax consequences relevant to their Subscription, acquisition, holding, capitalization, disposal (by way of sale, transfer, switch, Redemption or conversion into money) of portfolio within their jurisdiction or under the laws of any jurisdiction to which they may be subject to possible legal, tax, financial or other consequences.
  • From time to time, the affiliates/associates of the portfolio manager may invest either directly or indirectly in the Securities. Their investment may be the same or differ from the investment made by the portfolio manager for its clients. The investment made by these affiliates/ associates may acquire a substantial portion and collectively constitute a major investment in the Scrip. Accordingly, Redemption of such scrip’s may have an adverse impact on the value of the portfolio because of the timing of any such Redemption and may affect the ability of other investors to redeem their investments.
  • As the liquidity of the portfolio investments may sometimes be restricted by trading volumes and settlement periods, the time taken by the portfolio manager for Redemption of securities may be significant in the event of an inordinately large number of Redemption requests or of a restructuring of the portfolio.
  • The tax benefits described in this disclosure document are as available under the prevailing taxation laws. Investors should be aware that the relevant fiscal rules or their interpretation may change. As is the case with any investment, there can be no guarantee that the tax position or the proposed tax position prevailing at the time of an investment in the portfolio Product will endure indefinitely. In view of the individual nature of tax consequences, each investor is advised to consult his/ her/ their own professional tax advisor.
  • Redemptions due to a change in the fundamental attributes of the portfolio or due to any other reason may entail tax consequences. Such tax shall be borne by the investor and the Portfolio manager shall not be liable for any tax consequences that may arise.
  • Portfolio Manager invests in Securities which may not always be profitable and there can be no guarantee against loss resulting from investing in the Portfolio Product. The portfolio value may be impacted by fluctuations in the bond markets, fluctuations in interest rates, prevailing political, economic and social environments, changes in government policies and other factors specific to the issuer of the securities, tax Laws, liquidity of the underlying instruments, settlement periods, trading volumes etc.