Every investment involves some risk. Here are some factors that may cause the fund’s value to move up and down:
General investment risks
Risk that the market value of investments may change due to a number of factors. These can include changes in economies, world events (such as pandemics), environmental events, climate change, the performance of individual entities, regulatory changes, investor sentiment, political events, inflation, and interest and currency exchange rates.
Risk that changes in currency exchange rates will affect the value of the fund. Investments denominated in foreign currencies are exposed to currency risk. For example, for a fund with foreign currency exposure, if the New Zealand dollar increases in value against a given foreign currency, all else being equal, the New Zealand dollar value of the fund will fall.
Risk that an asset cannot be sold at the desired time or at a reasonable value. Liquidity risk may impact your ability to withdraw, transfer or switch your investment.
Active management risk
Risk that arises from the Investment Manager ANZ Investments, or external fund managers’, active management of investments.
As an active manager, ANZ Investments makes decisions about what proportion of each asset class to hold, what investments to hold, and the level of currency exposure. If ANZ Investments, or the external fund managers choose investments that underperform, the value of the fund may fall.
Risk that arises from the use of derivatives where the value is derived from the performance of another asset, or index (such as a share market index), an interest rate or an exchange rate.
For example, investment losses could be caused by changes in the value of the underlying assets, indices or rates.
Asset allocation risk
Risk of changes in the value of the fund due to exposure to riskier assets. Funds that invest in more growth assets (such as equities, listed property and listed infrastructure) may go up and down in value more over the short term, than funds that invest in more income assets (such as cash and cash equivalents, and fixed interest).
To understand the risks, it’s important to understand how MFL invests. More details on how MFL invests can be found in the statement of investment policy and objectives, which is available on the scheme register at companiesoffice.govt.nz/disclose (click on ‘Search schemes’ and search MFL Mutual Fund).
It’s also important to understand your own attitude to risk. Talk to your financial adviser for more information.