What Are The Risks?

All investments involve varying degree of risk. There are many possible outcomes associated with an investment and there are a multitude of factors, many beyond the control of investors that affect investment returns. Below is an outline of the major risks faced by investors in general, and Commerce Asset Fund Managers (CAFM) approach to managing these risks within the Funds.

Market Risk
Interest Rate Risk
Company or Security Specific Risk
Inflation Risk
Liquidity Risk
Loan Refinancing Risk
Compliance Risk

Market Risk

Market risk is the risk of negative movements that affect the price of all assets in a particular capital market. The factor influencing the performance of the markets include : Economic and Financial market conditions Political changes Broad investor sentiment Movements in interest rate and inflation An example of such a negative impact would be a fall in the value of shares on the Malaysian share market as a result of a contraction in the economy

Interest Rate Risk

Interest rates are inclined to fluctuate over time. A rise in the general level of interest rates will result in a decline of the value of the value of all bonds and fixed interest securities. Company or Security Specific RiskThere are many specific risk, which apply to individual companies or securities. Examples include the possible effect on a company of losing a key executive, or the unforeseen entry of a new competitor into the market. Other risks which apply to individual bond and fixed interest securities include the potential for a company to default on the repayment of the coupon and / or principal of its fixed interest securities, or the implications of a company's credit rating being downgraded. It is not possible to anticipate all company or security specific risks. However, CAFM seeks to identify potential risks, prior to investing, through their process. All investments are then monitored closely to enable its fund managers to assess changes in circumstances and, where necessary, alter the Fund's exposure.Top
Inflation RiskInflation risk is the potential loss of purchasing power of your investment due to a general increase of consumer prices. Inflation erodes the real rate of your return, that is, the return after you take away the inflation rate.

Liquidity Risk

Where the Funds invest in bonds, the Funds are exposed to liquidity risk given the fact that the Malaysian bond market is not as liquid as its sharemarket. As a result, it may not always be possible to immediately sell or buy fixed income securities at the prevailing market price. In order to mitigate this risk, CAFM actively manages the maturity structure of the portfolio. Investment in illiquid private debt securities will only be considered when commensurate with attendant risks. Factors such as the issue size of the bond, the issuers' total debt outstanding and sector limits are also taken into consideration to mitigate liquidity risk.

Loan Refinancing Risk

Borrowing to invest can multiply the effect of an increase or decrease in the value of your investment. If the value of your investment falls below a certain level, you may be asked by the financial institution to reduce the outstanding loan amount to the required level. Your borrowing cost may also vary from time to time depending on the fluctuations in interest rates. We suggest that you carefully assess the risks of using loan financing in light of your investment objectives, attitude to risk and financial circumstances before borrowing to invest in the Funds.

Compliance Risk

A lack of fiduciary care by a management company to uphold the interests of its unit holders poses a risk to investors. To ensure that compliance with all the applicable requirements are met at all times, sufficient internal controls must be in place to protect the interests of the unit holder. In order to manage this risk, CIMB-Principal Asset Management has a dedicated compliance procedures to ensure that the Deed, prospectus, SC Guidelines and securities laws are adhered to at all times by the investment manager and Unit Trust Manager.