Don't invest unless you're prepared to lose all your money.

These are high-risk investments and you are unlikely to be protected if something goes wrong.

Risk summary for non-readily realisable securities which are shares:

Last updated: 31 March 2024

Estimated reading time: 2 min

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. Most start-up businesses fail.

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 or via the following URL link: 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 or via the following URL link: https://www.financial-ombudsman.org.uk/consumers.

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 start-up business, you should not expect to get your money back through dividends. Start-up 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 anyone to do well.

A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Read more about it here or via the following URL link: https://www.fca.org.uk/investsmart/5-questions-ask-you-invest.

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. Most start-up 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.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here or via the following URL link: https://www.fca.org.uk/investsmart.

Please find the PDF version here.

Introduction

SRD II aims to improve stewardship and corporate governance by firms including Alternative Investment Fund Managers that invest in shares traded on a regulated market in the EEA as well as ‘comparable’ markets situated outside of the EEA. Under FCA COBS 2.2B.5R, we are required to:

1) develop and publicly disclose an engagement policy that meets the requirements of COBS 2.2B.6R; and
2) publicly disclose on an annual basis how our engagement policy has been implemented in a way that meets the requirements of COBS 2.2B.7R; or
3) publicly disclose why we have chosen not to comply.

The engagement policy must describe how a firm:

1) Integrates shareholder engagement in its investment strategy;
2) Monitors investee companies on relevant matters, including:
(a) strategy;
(b) financial and non-financial performance and risk;
(c) capital structure; and
(d) social and environmental impact and corporate governance;
3) Conducts dialogues with investee companies;
4) Exercises voting rights and other rights attached to shares;
5) Cooperates with other shareholders;
6) Communicates with relevant stakeholders of the investee companies; and
7) Manages actual and potential conflicts of interests in relation to the firm’s engagement.

On an annual basis, the firm must disclose a general description of voting behaviour, an explanation of the most significant votes and reporting on the use of services of proxy advisors. The disclosure must include how votes have been cast unless they are insignificant due to the subject matter of the vote or to the size of the holding in the company.

Sapphire Capital Partners LLP ("Sapphire") believes in the importance of effective stewardship and long-term decision-making, involving transparency of engagement policies between institutional investors and the investee companies.

Sapphire considers that an engagement policy is not appropriate to the investment strategies pursued by the fund(s) to which we provide investment services. The Firm has chosen not to comply on the basis that Sapphire follows a purely venture capital strategy, and investing in shares traded on a regulated market is not a primary activity of the firm.

The disclosure was last updated on 01 March 2023.

Shareholder Rights Directive II ("SRD II")

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