Capital Risk

Client Analysis Software (CAS)

Capital Risk

Investing into growth assets such as business assets, property and shares carries inherent capital risk. The higher the level of growth assets and the higher the level of risk associated with each individual growth asset, the greater your total capital risk. Capital risk is the risk of losing all or part of your capital as a result of a significant reduction in the value of your ‘at risk’ growth assets.

Reducing asset values will directly impact on your net asset position. The percentage reduction in net asset position will be magnified by higher levels of gearing, or reduced by a greater allocation to defensive assets.

The Capital Risk Analysis is designed to determine your estimated capital risk for comparison against an appropriate ‘Capital Risk Benchmark’ based upon the strength of your financial position and your Investment Risk Profile. Your capital risk is set at a level based upon our estimate of the maximum volatility of your combined growth assets during a typical ten year cycle. The ‘Capital Risk Benchmark’ is expressed as a percentage loss of your net asset position. These benchmark percentages vary according to your Investment Risk Profile. Your ‘at risk’ growth assets and their respective risk factors are displayed in both tables and charts.

We may also include any other risks that are likely to negatively impact your balance sheet such as personal guarantees, exchange rate risks, business risks, taxation risks and litigation risks. The sum of these capital risks are then calculated and compared to both your total ‘at risk’ growth assets and your net asset position.

All growth assets carry inherent capital risk. Capital risk may be managed but often cannot be eliminated. It is important that you accept the level of capital risk associated with your position.

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