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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?
You could lose all the money you invest
- Investments made by the Calculus will be in shares in early-stage businesses. Investors in these shares often lose 100% of the money they invested, as many early-stage businesses fail.
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. https://www.fscs.org.uk/check/investment-protection-checker/
- 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. https://www.financial-ombudsman.org.uk/consumers
You won’t get your money back quickly
- Even if the businesses the Fund invests your money in are successful, it may take several years to get your money back.
- The most likely way to get your money back is if the businesses invested in by the Fund are bought by another business or list their shares on an exchange such as the London Stock Exchange. These events are not common.
- Early-stage businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
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. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
The value of your investment can be reduced
- The percentage of each investee company that the Fund owns will decrease if the business issues more shares. This could mean that the value of your investment in each investee company reduces, depending on how much the business grows. Most early-stage businesses 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.
Tax advantages not guaranteed
- Whilst it is the Fund’s intention to invest in companies qualifying under EIS legislation, Calculus cannot guarantee that all investments will qualify for EIS relief (or IHT relief) or, indeed, if they do initially, that they will continue to do so throughout the life of the investment. The tax advantages of investing through the Fund are therefore not guaranteed.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here. https://www.fca.org.uk/investsmart