Investment risks
Major risks
Market risks
- Directional; not market neutral
- Primarily invest in equity
- Will experience equity-like volatility at times
- At times, markets experience great volatility and unpredictability
Broad investment flexibility
- No benchmark orientation; few investment restrictions
- Geographic, sector, market-cap, and asset class emphases may shift over time
Liquidity risk
- Portfolio of illiquid/private companies
- The return of invested capital to limited partners may be dependent on the success of the companies held in the portfolio, and the timing of such liquidity is uncertain
Sector risk
- May concentrate by sector; potential for lack of diversification
Country/currency risk
- May concentrate by country
Transparency risk
- Holdings, pricing, and other data may be limited and, thus, less transparent than certain other investments
Regulatory risk
- Not subject to the same regulatory requirements as mutual funds or many other pooled investments
Concentration risk
- In general, investing in strategies with concentrated exposures to (i) a particular asset class or classes, and/or (ii) a particular sector, and/or (iii) one or a select few markets involves greater risk than investing in strategies that have greater diversification
Risk of underlying assets
- In general, each strategy will be subject to the same risk factors as those relating to the underlying securities or assets held in its portfolio
Early-stage diverse venture risks
Extended term and liquidation
- The total hold period for an investment in the strategy will be much longer as compared to that of other investment products. The strategy’s term may extend for ten (10) years from the final closing date, with the possibility of five (5) or more years of extensions, followed by an indefinite liquidation period. This risk is increased by expected significant follow-on investment activity later in the strategy’s term and investments in underlying funds that will also have indefinite liquidation periods. Costs and expenses incurred by the strategy in connection with an extended term and liquidation period are expected to be significant.
Layered fees
- The strategy has a layered fees and expenses structure that makes total costs and expenses higher relative to other investment products.
Loss of key personnel
- The performance of a strategy is largely dependent on the skill and decisions made by its manager and key personnel, and the loss of any such individual could have a material adverse effect on the performance of the strategy.
Change in investment policy
- The manager of a strategy typically has the authority to alter its investment policy within certain parameters (set out in its constitutional document) by amending the prospectus. This could represent a fairly significant change in the nature and risk profile of the strategy from the one in which you originally invested.
This is a summary of some of the major risks.
Important disclosures
For professional, institutional, or qualified investors only. Past results are not necessarily indicative of future results. There can be no assurance the funds will achieve their investment objectives or avoid significant losses. Any securities mentioned are for illustrative purposes only and are not intended to be an investment recommendation. There can be no guarantee an investment in any portfolio company will be profitable or avoid losses. For a complete list of the private equity strategies’ investments please see https://www.wellington.com/en-us/institutional/capabilities/private-equity.
The private strategies differ in stage, with some making earlier-stage or venture-stage investments whereas others are later-stage strategies. The risks associated with early-stage investing differ from late-stage. Additionally, each strategy considers ESG and sustainability in different ways according to its investment strategy and objectives. Please refer to each strategy’s offering documents for a complete discussion of risks and details regarding investment strategy.
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