Risk summary for non-mainstream pooled investments

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be very complex and high risk.

What are the key risks?

1. You could lose all the money you invest
   • By investing into a real estate project through Shojin you will be investing in shares issued by Special Purpose Vehicles (SPV’s) which provide a funding facility for the purpose of real estate development. If the project fails, Investors can lose some or all of the money they invested.
   • Advertised rates of return aren’t guaranteed. This is not a savings account. If the project doesn’t pay the SPV back as agreed, you could earn less money than expected or nothing at all. A higher advertised rate of return means a higher project risk with an increased probability of losing your money.
   • Due Diligence and project oversight is carried out by the platform on each Shojin project that you are investing into to assess how well they are expected to perform. However, you should always also do your own research before investing.
   • These investments are sometimes held in an Innovative Finance ISA (IFISA). While any potential gains from your investment will be tax free, you can still lose all your money. An IFISA does not reduce the risk of the investment or protect you from losses.
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.
   • 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.
3. You are unlikely to get your money back quickly
   • This type of property investment could face delays that can delay payments. These investments could also fail altogether and be unable to repay investors their money.
   • You are unlikely to be able to cash in your investment early by selling your investment. In the rare circumstances where it is possible to sell your investment in a ‘secondary market’, you may not find a buyer at the price you are willing to sell.
4. This is a complex investment
   • This investment has a complex structure to ensure the interest of investors is protected. Investments are made into each designated project SPV and are ringfenced from other project SPV's to ensure full transparency of each investment made.
   • You may wish to get financial advice to understand how the structure works before deciding to invest.
5. 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 any one to do well.
   • A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here for information on smart investments.

For further information about unregulated collective investment schemes (UCIS), visit the FCA’s website here for information on unregulated collective investment schemes.