Triodos SICAV I is exposed to a variety of risks. These include market, concentration, interest rate, counterparty, currency, liquidity, operational and legal risks. The risk profile is relatively stable over time and is driven by our risk appetite and is steered by our risk management practices and framework.
Within the risk framework, the functions and reporting lines of the various risk committees are set out. These risk committees have an advisory role. A coherent and effective risk management system is of vital importance. Risk Management entails the identification and assessment of risks together with the formulation and execution of mitigation measures. The ultimate aim of our risk management is to safeguard capital adequacy, thereby protecting the interests of our shareholders.
The Sub-Funds are subject to market risk, which is the risk caused by changes in the prices of the investments. This risk increases in line with the volatility of asset prices. The Sub-Funds mitigate this market risk by means of careful selection and diversification of investments. Nevertheless, a disappointing performance cannot be ruled out. The investment universe of Triodos SICAV I does not reflect the various country indices. The performance of the Sub-Funds may therefore temporarily diverge from these indices, both in a positive and a negative sense. Triodos SICAV I does not invest in derivatives.
The Sub-Funds do not have a specific sector focus. They mainly invest in countries that are members of the European Union and in the United States and Japan. The nature of the assets that are included in the portfolio, and therefore the risk/return profile, varies per Sub-Fund.
- Triodos Sustainable Bond Fund invests mainly in corporate and sovereign bonds.
- Triodos Sustainable Equity Fund primarily invests in shares of listed large cap companies.
- Triodos Sustainable Mixed Fund invests mainly in shares of listed large cap companies and in corporate and sovereign bonds.
- Triodos Sustainable Pioneer Fund primarily invests in shares issued by small and medium-sized listed companies.
Interest rate risk
The values of fixed income securities held by the Sub-Funds generally will vary inversely with changes in interest rates and such variation may effect share prices accordingly.
A counterparty may fail to fulfil its obligations to the Sub-Fund. This risk is limited as much as possible by taking every possible care in the selection of counterparties.
Investments may be denominated either in euros or in foreign currencies. In principle, the currency risks that arise due to these investments are not hedged. However, the Board of Directors of Triodos SICAV I may at its discretion take steps to mitigate these risks.
Liquidity risk occurs when investors want to exit the fund and the fund needs to sell its positions to meet these redemption requests. The fund performs quarterly stress tests to assess this risk. These tests show that the fund is able to quickly convert its assets into cash.
Operational risk includes the risks that arise from human error, process or system failure and from external events. It includes the improper handling of confidential information and the so-called compliance risk when regulatory requirements are not met. The primary responsibility for the effective identification, management, and monitoring op operational risk lies within the Management Company.
The Fund may be subject to a number of unusual risks, including inadequate investor protection, contradictory legislation, incomplete, unclear and changing laws, ignorance or breaches of regulations on the part of other market participants, lack of established or effective avenues for legal redress, lack of standard practices and confidentiality customs characteristics or developed markets and lack of enforcement of existing regulations. There can be no assurance that this difficulty in protecting and enforcing rights will not have a material adverse effect on the Fund and its operations.
For further information about the risks we refer to the prospectus.