SMD-AM Japan Mid Small Cap Value

What are the key risks?
Investment involves risks. Please refer to the offering document for details including the risk factors.

1. Investment risk

• The Sub-Fund’s investment portfolio may fall in value due to any of the key risk factors below and therefore your investment in the Sub-Fund may suffer losses. There is no guarantee of the repayment of principal.

2. Currency risk

• A class of shares may be designated in a currency other than the base currency of the Sub-Fund. The net asset value of the Sub-Fund may be affected unfavorably by fluctuations in the exchange rates between these currencies and the base currency and by changes in exchange rate controls. 

3. Equity market risk

• The Sub-Fund’s investment in equity securities is subject to general market risks, whose value may fluctuate due to various factors, such as changes in investment sentiment, political and economic conditions and issuer-specific factors.

4. Risk associated with small-capitalisation / mid-capitalisation companies 

• The stock of small-capitalisation / mid-capitalisation companies may have lower liquidity and their prices are more volatile to adverse economic developments than those of larger capitalisation companies in general.

5. Concentration risk

• The Sub-Fund’s investments are concentrated in Japanese equity securities of small and mid-cap companies and may be concentrated in a specific industry sector. The value of the Sub-Fund may be more volatile than that of a fund having a more diverse portfolio of investments.
• The value of the Sub-Fund may be more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting the Japanese market.

6. Risk of specific investment strategy 

Risk associated with PBR-ROE approach

• The PBR-ROE approach may not achieve the desired results under all circumstances and market conditions.

Risks of using AI scores as part of the investment process

• The AI learns the characteristics and habits of the Sub-Portfolio Manager’s stock research, and AI scoring is used to reduce the time spent on research by the Sub-Portfolio Manager. Therefore, there is a risk that the Sub-Portfolio Manager’s characteristics and habits may not be reflected in the scores. In the event of such AI deficiencies, the Sub-Portfolio Manager would have to perform all research on its own without the help of AI, increasing the time spent by the Sub-Portfolio Manager on research and leading to a significant deterioration in research efficiency.
• To manage this risk, verification can only be carried out by the Sub-Portfolio Manager and the Sub-Portfolio Manager carries out verification from time to time. Updates will be made from time to time to reflect the Sub-Portfolio Manager’s characteristics and practices.

7. Risks relating to hedging and the hedged share classes

• There can be no assurance that any currency hedging strategy employed by the Sub-Fund will fully and effectively eliminate the currency exposure of the Sub-Fund.
• Hedging strategies may preclude investors from benefiting from an increase in the value of the Sub-Fund’s base currency.
• Any expenses arising from such hedging transactions will be borne by the Sub-Fund or the relevant currency hedged class. 

8. Risks associated with usage of financial derivative instruments (“FDIs”)

• Risks associated with FDIs include counterparty/credit risk, liquidity risk, valuation risk, volatility risk and over-the-counter transaction risk. The leverage element/component of an FDI can result in a loss significantly greater than the amount invested in the FDI by the Sub-Fund. Exposure to FDIs may lead to a high risk of significant loss by the Sub-Fund.
• There can be no assurance that the use of FDIs for hedging purposes will fully and effectively eliminate the risk exposure of the Sub-Fund. The use of FDIs and hedging strategies may be ineffective and the Sub-Fund may suffer substantial losses.