Page 25 - DIY Investor Magazine | Issue 38
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Conflict of Interest Risk: The AIFM, the Portfolio Managers and their affiliates will provide services to other clients, which could compete directly or indirectly with the activities of the Company and may be subject to conflicts of interest in respect of their activities on behalf of the Company.
COVID-19 Risk: The long-term impacts of Covid-19 are unknown, rapidly-evolving and may be materially more severe and/or more permanent than anticipated. It is difficult to accurately predict the effects these factors may have on the investee companies within the Company’s portfolio and on the Company. The Company may invest in investee companies which do not meet the target returns anticipated by the Portfolio Managers (being Schroder Investment Management Limited and Schroders Capital Management (Switzerland)
AG (the “Portfolio Managers”)) due to the Portfolio Managers underestimating or failing to accurately predict or foresee the time scale, severity and/or impacts of the Covid-19 crisis, which could result in a material adverse impact on the performance of the Company, the NAV and the returns to Shareholders.
COVID-19 Strategy Risk: The Company’s strategy is to invest, initially, in companies impacted by the Covid-19 crisis in the approximately £50 million to £2 billion equity value range. These companies may not have the financial strength, diversity and resources which larger companies may have and there may
be a higher risk that these companies will find it more difficult to operate during the Covid-19 crisis, as well as in periods of economic slowdown and recession.
The risk of bankruptcy of such companies is also generally higher. Therefore, investment in such companies could
be riskier than investments in larger companies and the deterioration in the financial condition or bankruptcy of such companies may result in greater volatility in the Company’s net asset value (“NAV”) and may materially and adversely affect the performance of the Company and returns to Shareholders.
Fixed-life Risk: The Company has a fixed life and in the event that no alternative proposals are put forward to Shareholders and approved by Shareholders ahead of the winding-up date, a winding-up resolution will be proposed at the winding-up date to voluntarily liquidate the Company.
This could mean that certain investments, in particular, private equity investments, may not be able to be realised at an optimal price, or that the realisation of such investments may take longer than anticipated (as it could take several years after the commencement of the winding-up of the Company until all of the Company’s private equity investments could be disposed of and any final distribution of proceeds made to Shareholders).
Illiquid Market Risk: There may not necessarily be a liquid market for shares in investee companies in the approximately £50 million to £2 billion equity value range even if their shares are publicly traded.
Investment Trust Status Risk: Failure by the Company
to maintain investment trust status, or changes in taxation legislation or practice, could result in the Company not being able to benefit from the current exemption for investment trusts from UK tax on chargeable gains and could affect the Company’s ability to provide returns to Shareholders.
No Guarantee and Investment Objective Risk: The Company may not meet its investment objective and returns of the Company are not guaranteed.
Private Equity Exit Risk: It is difficult to accurately time the exit of private equity investments. Exits will take time and
the Portfolio Managers may have very little influence on any decisions around the timing on exits. Realisations of private equity investments may not occur on a regular straight line basis. Should an exit of a private equity investment be effected in such manner or time frame which is not compatible with the Company’s investment horizon, this could result in a material adverse impact on the Company’s NAV and on the return to Shareholders.
Private Equity Valuation Risk: Private equity investments are difficult to value. Information from underlying investee companies may be delayed, missing or restricted which would lead to valuations being made on incomplete information.
Tax and Operations Risk: Changes in tax legislation or practices or laws or regulations governing the Company’s operations (in particular, the Listing Rules, the Prospectus Regulation, the Prospectus Regulation Rules, the Disclosure Guidance and Transparency Rules, the Market Abuse Regulation, the AIFMD and the PRIIPs Regulation) may adversely affect the Company’s business.
Aug 2023
DIY Investor Magazine ·

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