Risk Information
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers investments in bonds and private equity offerings to be high risk and complex.
What are the key risks?
1. You could lose all the money you invest
- If the business offering this investment fails, there is a high risk that you will lose all your money. Businesses like this often use risky investment strategies and typically operate in competitive or uncertain markets.
- Advertised rates of return aren’t guaranteed. This is not a savings account. If the issuer doesn’t pay you back as agreed, you could earn less than expected or nothing at all. Higher advertised rates often indicate a higher risk of losing your money. If it looks too good to be true, it probably is.
- These investments are sometimes held in an Innovative Finance ISA (IFISA). While potential gains from your investment will be tax-free, an IFISA does not reduce the risks of the investment or protect you from losses.
2. You are unlikely to be protected if something goes wrong
- The business offering this investment is not regulated by the FCA. Protection from the Financial Services Compensation Scheme (FSCS) only considers claims against failed regulated firms and does not cover poor investment performance. Use the FSCS investment protection checker here.
- The Financial Ombudsman Service (FOS) does not consider complaints related to non-FCA-regulated firms. For FCA-regulated platforms, FOS may review certain complaints. Learn more about FOS protection here.
3. You are unlikely to get your money back quickly
- Bonds, private equity investments, and other financial products backed by property projects may face delays or overruns, tying up your funds for longer than expected. In some cases, businesses may fail altogether and not repay your money.
- Early cash-out options are typically unavailable. Secondary market sales, if allowed, may not guarantee a buyer or desired price.
4. This is a complex investment
- These investments often involve complex structures that invest in other businesses, property, or projects. This makes it difficult to track where your money goes and assess risk accurately.
- Investments in bonds or private equity linked to property can carry high levels of uncertainty and risk. Seek independent financial advice before deciding to invest.
5. Don’t put all your eggs in one basket
- Concentrating your money in one type of investment or business is risky. Diversify your investments to reduce reliance on any one to perform well.
- A good rule of thumb is not to invest more than 10% of your total money in high-risk investments. Learn more here.
6. The platform could fail
- If the investment platform or issuer fails, it may be challenging or impossible to recover your funds. Plans to handle such failures may not always work as intended.
7. The value of your investment can be reduced
- If investment projects experience cost or time overruns, businesses may issue new shares or increase borrowings, potentially diluting your returns.
- New shares or borrowings may also be prioritized over existing ones, further reducing the chances of a return.
For further information about bonds and private equity investments or to protect yourself, visit the FCA’s website here.
Learn more about minibonds here.
For details about investment-based and loan-based crowdfunding, visit the FCA’s website here.
Email: acquire@plmd.co.uk
Tel: 07557 646000