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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
1. You could lose all the money you invest
- If the business you invest in fails, you are likely to lose 100% of the money you invested. Investment in smaller, unquoted companies by its nature involves a higher degree of risk than investments in listed and/or traded on regulated markets.
2. You are unlikely to be protected if something goes wrong
- Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
3. You won’t get your money back quickly
- Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
- The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
- If you are investing in a smaller, unquoted business, you should not expect to get your money back through dividends. Smaller, unquoted businesses rarely pay these.
4. Don’t put all your eggs in one basket
- Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
5. The value of your investment can be reduced
- The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Smaller unquoted businesses might issue multiple rounds of shares.
- These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here.
Kemeny Capital is exclusively aimed at UK resident persons who are required to self-certify as either a Sophisticated Investor or High Net Worth Individual.
Kemeny Capital provides a non-advisory service. Kemeny Capital provides access to high-risk investments in early-stage companies and investors may be exposed to a high-risk of loss. Kemeny Capital does not provide advice on investments, tax or legal affairs. You are required to make your own assessment on any investments and seek advice from an independent regulated financial advisor.
The value of investments may go up as well as down and there is no guarantee of any investment return. Investments in private companies carry significant risks including loss of capital, illiquidity, and no guarantee of regular income from the investment. You should understand the risks involved and be capable of making investment decisions based upon your personal circumstances. Past performance is not an indicator of future performance.
Loss of Investment
Early-stage companies are high risk investments and many start-ups and early-stage companies fail or do not achieve their initial business targets. This puts investors who invest in companies accessed through Kemeny Capital at potential high risk of losing some, or all, of their capital.
Tax Relief Risk
Tax reliefs are subject to individual circumstances and there is no guarantee an investor will receive the tax benefits associated with any investment. Kemeny Capital does not provide tax advice.
Kemeny Capital provides access to unquoted high-risk investments. It is unlikely there is a liquid secondary market for any investments meaning it will be difficult to sell your investments. Any investments made through Kemeny Capital should be viewed as long term investments.
Lack of Dividends
Investments made through Kemeny Capital may not pay dividends for a considerable time, if at all.
When investing in early-stage companies it is likely the company will raise further funds in the future through additional equity raises. In this situation, it is likely your stake in the company is diluted and your stake, including but not limited to value, voting and dividends, may not be worth as much as it otherwise would be on a successful exit.