What are scheme specific risks?
Scheme specific risk factors pertain to the scheme being offered and include the following: Risk arising from investment objective, investment strategy and asset allocation of a scheme: For example, a scheme may decide to invest in small illiquid shares, as a strategy to earn higher returns. This strategy however, has the risk that the scheme’s liquidity and return volatility are impacted by the presence of illiquid shares in the portfolio. The Offer document has to state the specific risks that investors have to bear while investing in such a scheme. Risk arising from non-diversification, if any: If a scheme offers assured returns, the scheme must state that the assurance is on the basis of guarantees by sponsor/AMC. The net worth and liquidity position of such a guarantor should also be disclosed. If guarantees are for only a specified period, that should be explicitly stated. If the AMC has no previous experience in managing a Mutual Fund, a disclosure to the effect that this is the
