Risks related with financial services

“CBL Asset Management” IPAS is an investment management company registered in the Republic of Latvia. Its areas of activity include individual management of clients' portfolios, investment funds and pension plan funds as well as provision of consultations in investment matters.

“CBL Asset Management” IPAS operates in accordance with principles of diversity, nevertheless general risks related with investment management companies still exist. Investors should prudently acquaint themselves with risks related with financial services and transactions. Prior to adopting an investment decision or performing a financial transaction, it is important for clients to consult an independent financial consultant and to review regulatory acts on possession and management of financial resources.

Clients should thoroughly weigh out whether they are capable of assuming risks related with financial services observing their investment experience, goals, financial resources and other conditions. “CBL Asset Management” IPAS considers it necessary to point out at least the following risks:

  • Principal risk – clients should be aware that the price of securities as well as profit obtained from them are subjected to fluctuations which have a direct impact on the value of investment certificates possessed by them;
  • Economic risk – related with changes in the economic situation in investment regions, for example, economic recession, excessive inflation, bank crisis, etc.;
  • Political risk – related with countries becoming involved in military conflicts and warfare as well as changes in political environment of countries, for example, violent subversions of the government, coup d'état. Such factors usually have a great impact also on the financial market of the corresponding country and they have an influence on fund performance results;
  • Currency risk – these are possible losses which possessor of fund investment certificates may incur due to unfavourable fluctuations of currency rates;
  • Liquidity risk – actual opportunities of realizing (sell or equalize) any of fund assets at any time. If financial instruments or any other assets can be sold or equalized and the average sales application does not cause significant price fluctuations (in comparison with the market volume of transactions), the market can be regarded as liquid;
  • Financial risk – financial risk for investment funds which is mainly related with a situation when clients request redemption of their investment certificates due to external factors (cannot be influenced by Company) which leads to a decrease in the fund’s performance;
  • Information risk – non-availability or lack of truthful information on securities market which depicts the issuer's actual situation;
  • Issuer’s default risk – related with opportunities for issuer to default its liabilities towards possessor of securities. When planning fund investment policy, Company observes security of investing in each particular country and in concrete securities and term deposits, i.e. credit ratings of each country, bank or company are analyzed. Occurrence of this risk may partially or fully facilitate default of liabilities in relation to a particular financial instrument and thus leave a negative impact on the fund’s value;
  • Derivatives risk – clients should be aware that investments in derivatives are related with a high level of risk. Liabilities or requirements from such transactions may decrease or cease to exist. Risk of loss under different conditions cannot be determined and it may exceed the value of mortgage. If loans are applied to cover liabilities arising from derivatives transactions or if obligations or claims from such transactions are denominated in foreign currency, risk of loss may increase;
  • Accounting and double taxation risks – associated with application of different accountancy principles for securities filing and registering systems in different countries which may result in additional burden on investments as well as higher tax rates may be imposed on investments made by non-residents abroad, thus fund assets may be more encumbered than investments in the local market;
  • Competition risk – one should consider competition between Latvian investment management companies and foreign fund management companies which may increase along with development of this market niche. As a result, investment management company may discontinue cooperation and fund management may be handed over to another investment management company or custodian bank;
  • Other risks – investment management company’s activity may be influenced by other risks, such as natural calamities, environmental deterioration, crime, etc. which the company cannot fully predict or control.

This information does not contain a full list of risks related with financial services!