Investment risks
Major risks
Market risks: Directional; not market neutral. Primarily invests 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.
Early-stage venture risks
Concentration risk: In general, investing in strategies with concentrated exposures to (i) particular asset class(es), 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. | 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 fee and expense structure that makes total costs and expenses higher relative to other investment products. Loss of key personnel | The performance of an underlying fund 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 an underlying fund typically has the authority to alter its investment policy within certain parameters (set out in its constitutional document) by amending the fund’s 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. | Summary of some of the major risks.
Investment Grade Private Placement Investment risks
CONCENTRATION RISK: Concentration risk is the risk of amplified losses that may occur from having a large percentage of your investments in a particular security, issuer, industry, or country. The investments may move in the same direction in reaction to the conditions of the industries, sectors, countries and regions of investment, and a single security or issuer could have a significant impact on the portfolio’s risk and returns. | CREDIT RISK: The value of a fixed income security may decline due to an increased risk that the issuer or guarantor of that security may fail to pay interest or principal when due, as a result of adverse changes to the issuer’s or guarantor’s financial status and/or business. In general, lower-rated securities carry a greater degree of credit risk than higher-rated securities. | FIXED INCOME SECURITIES RISK: Fixed income security market values are subject to many factors, including economic conditions, government regulations, market sentiment, and local and international political events. In addition, the market value of fixed income securities will fluctuate in response to changes in interest rates, and the creditworthiness of the issuer. | INTEREST RATE RISK: Generally, the value of fixed income securities will change inversely with changes in interest rates, all else equal. The risk that changes in active interest rates will adversely affect fixed income investments will be greater for longer-term fixed income securities than for shorter-term fixed income securities. | LIQUIDITY RISK: Investments with low liquidity may experience market value volatility because they are thinly traded (such as small cap and private equity or private placement bonds). Since there is no guarantee that these securities could be sold at fair value, sales may occur at a discount. In the event of a full liquidation, these securities may need to be held after liquidation date. | RESTRICTED SECURITY RISK: Restricted securities are securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer. These securities may not be transferable until certain criteria are met and under the federal securities laws, generally may be resold only to qualified institutional buyers, resulting in liquidity risk.
Important disclosures
For professional, institutional, or qualified investors only. Past results are not necessarily indicative of future results. There can be no assurance the strategies 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 investments please see https://www.wellington.com/en-us/institutional/capabilities/private-equity.
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