Risk Information

Please note that the risk factors listed below are not fully inclusive of all risks associated with private market investments. For more details regarding risks and tax consequences, investors should consult the relevant private placement memorandum. Additional information can also be found in the brochure Risks in Trading with Financial Instruments published by the Swiss Bankers Association (www.swissbanking.ch).

Financial and Business risk/leverage

Investments in private markets generally involve a significant degree of financial and/or business risk. Companies or funds may be highly leveraged and therefore be more sensitive to adverse business or financial developments or economic factors. Such investments may face intense competition, changing business or economic conditions or other developments that may adversely affect their performance.

If, for any of these reasons, an investment in a private market asset, fund or a company is unable to generate sufficient cash flow to meet principal or interest payments on its indebtedness or make regular payments, the value of the underlying investment could be significantly reduced, or eliminated entirely. A leveraged investment’s income and net asset value will tend to fluctuate more significantly compared to investments without borrowed capital. Business risks can be particularly significant in co-investments or in companies pursuing value-add or opportunistic strategies.

Lack of liquidity (illiquidity)

Private market investments are generally illiquid as they are not listed or traded on any exchange. Investors should expect to hold their investment for the full term, which is typically five years or more. The underlying investments may, at any given time, consist of significant amounts of securities and other financial instruments or obligations that are thinly traded, or for which no market exists.

Insufficient investment opportunities – commitment-based investments

For commitment-based investments, the fund depends on its investment professionals and managers to identify attractive investment opportunities. It is possible that sufficient opportunities may not materialize during the investment period, preventing full deployment of committed capital. Even when attractive investment opportunities are identified, there is no guarantee that the fund will be permitted to invest.

Unspecified investments and loss of capital

Private market investments may be deployed over time, exposing investors to risks of adverse changes in capital markets (e.g. changes in interest rates and other potentially adverse economic developments). Investors should read the offering documentation of each investment and pay particular attention to the risk factors contained therein. Investments in private markets are not principal-protected, nor guaranteed. Past performance of the fund or of the underlying investment is not a reliable indicator of current or future performance. Future returns are not guaranteed, and investors may lose some or all of their original investment. Investors will be required to meet capital account obligations, forego any future income or gains on investments made prior to such default, and, among other things, lose any rights to participate in future investments or be forced to sell their investments at a price much lower than secondary market valuations. Any investor with insufficient funds to meet their commitment obligations may, therefore, incur significant losses.

Foreign currency risk

Investors subscribing for shares in any foreign currency should note that changes in the value of exchange between such currency and the respective home currency may have an adverse effect on the value, price or income of an investment.

Clawback provisions

It might be required that all or part of any prior distributions made to the investor is returned to the sponsor in order to meet the obligations toward the underlying investment deals. Accordingly, any amounts distributed to investors (by way of payment of dividends, distributions or redemptions proceeds) may be recalled.

Tax reporting

The sponsor will endeavor to make available all tax-related information in order to assist investors to meet any relevant tax filing obligations. However, the sponsor might be unable to provide all information required by investors to allow them to meet their tax filing obligations. While the sponsor will endeavor to structure its investments in a tax-efficient manner, there can be no guarantee that it will succeed in doing so. This could result in the returns of investors, directly or indirectly invested, being impacted by any such tax impact.

Tax risks

Tax laws, including laws relating to disclosure of investors to tax authorities, are subject to change. The tax risks outlined in the investment documentation should be read carefully by each prospective investor. Prospective investors are urged to consult their own tax advisors with respect to their particular tax solutions and the consequences of an investment, including potential legislative or administrative changes.

Complexity of private market investments

Private market investments are complex investments and may carry a high degree of risk. Such risks can arise from extensive use of complex structures, high-risk strategies, derivatives and debt instruments. Furthermore, the minimum investment periods can be long. Private market investments are intended only for investors who understand and can accept the associated risks.

Private market investments may include the following additional risks: (i) loss of all or a substantial portion of the investor’s investment due to the use of leverage, derivatives or high-risk strategies by investment managers; (ii) investment managers may have incentives to make investments that are riskier or more speculative due to performance-based compensation; (iii) lack of liquidity as there may be no secondary market and none is expected to develop; (iv) volatility of returns; (v) restrictions on transfer; (vi) potential lack of diversification that may result in higher risk due to concentration; (vii) high fees and expenses that may offset gains; (viii) little or no requirement to provide periodic pricing or detailed valuation information to investors; (ix) complex tax structures and delays in distributing important tax information to investors; and (x) fewer regulatory requirements than registered funds.

Club deal/co-investment risks

Club deals/co-investments will typically expose investors to risks associated with the sponsor of the club deal/co-investment or other control groups that are co-investing, which could have a negative impact on the value of such investments. For example, it is possible that the lead investor may have economic or business interests or goals (including financial constraints), which are inconsistent with or in conflict with those of the investors, or may be in a position to take or block an action in a manner adverse to the investors’ interests or investment objectives.

In addition, in pursuing any club deal/co-investment, there will generally be little opportunity to negotiate the terms of the club deal/co-investment or direct the affairs of a portfolio company. In particular, it may not be possible to determine the timing or terms of the disposition of the investment, but rather will be necessary to rely on the lead investor to make such determinations, which may or may not be in the best interest of the investors.

Furthermore, by virtue of its relationship with other investors in a particular portfolio company, it may be deemed, directly or indirectly, to be part of a control group and thus be exposed to potential liabilities of a controlling person with respect to the portfolio company, including liabilities for environmental damages and violations of other governmental regulations.

Co-investments

Co-investments made by an investor are subject to the risk that they will not have sole control of the assets, and that the realization of the investment may take longer than the realization of an investment under the sole control of the investor.

This is because co-investors in the investment will generally agree to an exit procedure requiring notification to the other co-investors, and possibly giving them first refusal or a right to initiate a buy-sell procedure (i.e. one party specifying the terms upon which it is prepared to purchase the other party’s or parties’ participation(s) in the investment, and the non-initiating party or parties having the option of either buying the initiating party’s participation or selling their participation in the investment on the specified terms).

Reliance on sponsor management – private Equity / fund investments

While each club deal/co-investment will be actively monitored, it is primarily the responsibility of the sponsor to operate the investment company on a day-to-day basis, and it will generally not be possible to exert significant influence on the investment.

Investment in developing or emerging countries

Investment opportunities may be presented in countries classified as developing or emerging countries, where the political and social situation is not always stable. These investments bear considerable risks. In relation to each other and in terms of macro-economic indicators, these countries may be doing more, or less well. Nationalization, expropriation, taxation, exchange rate controls, political changes, social unrest or unfavorable diplomatic developments may negatively impact the economy of a country and the portfolio’s investment in that country.  Investment is thus only suitable for investors that are fully aware of and capable of supporting risks related to such investment.

No diligence of investment opportunities

Before any investor participates in an investment with Club Estate, they should consult with their own advisors (including, but not limited to, legal, financial and tax advisors) and request and obtain any additional information they may need with respect to considering the relevant investment opportunity.

Club Estate makes no guarantee or statement that any investment opportunity will be profitable, or that an investor will not lose all or substantially all of its investment in any such co-investment opportunity. No investor is obligated to participate in any investment opportunity.

These risk factors are not fully inclusive of all associated risks. For more details regarding risks and tax consequences, investors should refer to the applicable documentation of each single investment. Prospective investors should consult with their own professional tax advisors, with specific reference to their own situations, with respect to the potential tax consequences of an investment in those opportunities.