General risk disclosures

You should be aware of and carefully consider the information in this risk disclosure before determining whether alternative investments with Hedonova are appropriate for you. An investment with Hedonova includes, but is not limited to, investments in hedge funds, fund of funds, equities, mutual funds, real estate, bonds, income sharing arrangement, crypto currencies, investment partnerships and managed account platforms, and more.

The terms and conditions of the risk disclosure statement apply to your use of Hedonova's website and other digital assets, as well as all of their contents, including but not limited to, content, articles, analysis, research tools, emails, notifications, text, data, visuals, information, materials, software, and graphics contained or provided through it in any form or media and all services that may be provided in conjunction with it. By using the website, registering as a member of the company either an investor otherwise or accepting any related services from the company, you agree that:

1. You have read and understood this risk disclosure statement; and 
2. You are bound by this risk disclosure statement.

In consideration of Hedonova agreeing to allow you to use the website, you acknowledge, understand and agree to the following:

Investments with Hedonova are speculative and are highly risky. Investing in alternative investments, is highly speculative and is suitable only for those who (a) understand and are willing to assume the economic, legal and other risks involved, and (b) are financially able to assume significant losses. Alternative investments are not an appropriate investment for retirement funds. You represent, warrant and agree that you understand these risks; that you are willing and able, financially and otherwise, to assume the risks of alternative investments and that loss of your entire account balance will not change your lifestyle. Before deciding to invest, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment, therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with investments, and seek advice from an independent financial advisor.

Investments with Hedonova are not regulated. Hedonova is an unregistered private investment partnership (sometimes known as a fund or pool) that invests and trades in a variety of market strategies and instruments (such as securities, non-securities, and derivatives) and employs various investment, hedging, leverage, and arbitrage methodologies. Investments are not subject to the same regulatory requirements as mutual funds, such as providing certain periodic and standardized pricing and valuation information to investors. Investment documents are not reviewed or approved by regulators in any jurisdiction. Hedonova is not obligated to provide periodic pricing or valuation information to investors, and may not disclose this information.

Hedonova may employ speculative and risky investment strategies. Alternative investments may employ a distinct strategy, which may not have a readily available comparative benchmark or index. Alternative investments may be leveraged (including highly leveraged) and a hedge fund performance may be volatile. Alternative investments may use benchmarks or targets for measurement purposes. There is no guarantee that alternative investment goals, objectives, benchmarks or targeted returns will be achieved or reached. Strategies intended to hedge risk may be partly or wholly unsuccessful. Some alternative investments may employ a single advisor or strategy, which could mean a lack of diversification and higher risk. Some alternative investments execute a portion, and in some cases a substantial portion, of trades on foreign exchanges or over the counter markets. Such trades could involve a higher degree of risk.

Investments with Hedonova may have limited liquidity and carry high management fees. Alternative investments may be illiquid or have limited liquidity, and there may be significant restrictions on transferring interests when there is no secondary market and none is likely to develop. Fees and expenses, which may be substantial regardless of any positive return, may offset the profits earned. Alternative investments may have a complex tax structure (which should be reviewed carefully) as well as delays in the dissemination of important tax information.

Hedonova may have little or no operating and performance history. We may use hypothetical or pro forma performance, which may not reflect actual trading done by the manager or advisor. Such history or performance should be reviewed carefully. Investors should not place undue reliance on pro forma or hypothetical performance. Alternative investments and their managers/advisors may rely on the expertise and experience of third-party managers or advisors; whose identities may not be disclosed to investors.

Past performance not indicative of future results. The past performance of any investment, including those with Hedonova, does not guarantee future performance or effectiveness. Users of the website must exercise independent judgment when making investment decisions and expressly assume full responsibility for any losses. Past performance does not guarantee or indicate future results.

No guarantees of profit. There are no guarantees of profits, dividends or freedom from loss in investments. You have received no such guarantees from Hedonova or from any of its agents, employees or affiliates. “You are aware of the risks associated with alternative investments and are financially capable of bearing such risks and withstanding losses incurred, if any.

Use of website is informational only. Hedonova is not an investment adviser, as defined by the Investment Advisers Act of 1940, and has no plans to register as one. Hence, the company is not an adviser or a fiduciary to you or any other user of the website. Neither the website nor any information provided on it constitutes an offer to buy or sell, or a solicitation of an offer to buy or sell, any security or investment. Each and every decision you make to buy or sell a security, as well as whether a security is appropriate or proper for you, is an independent decision. You agree that the company has no fiduciary duty to you and bears no responsibility for any liabilities, claims, damages, costs or expenses, including attorneys' fees, incurred as a result of your use of the website or any data contained therein.

The preceding summary is not a complete account of the risks and other important disclosures associated with alternative investments, and is subject to the more extensive and specific disclosures contained in such documents, with respect to any particular alternative investment. 

Before making any investment, investors should carefully review all of our offering documents with their financial, legal, and tax advisors to decide whether an alternative investment is suitable for them given their investment objectives, financial status, and tax situation. This brief statement cannot, of course, disclose all the risks and other aspects of alternative investments. By using the website or the data contained therein in any way, you hereby acknowledge that you have received, read, understood and agree to be bound by this risk disclosure statement.

General risks

Market Conditions 

Market conditions, such as illiquidity, and the operation of certain market rules, such as market hours, dealing hours, and trade suspension, may increase the risk of loss by making it difficult or impossible to complete transactions or enter or exit investments.

Social & political

Government policy and wider political, social and environmental issues have the potential to significantly affect the value of investments. For example, regulation can constrict industry, just as favourable tax breaks can benefit it. Political decisions, instability and changes to public sentiment create uncertainties for business and therefore represent a risk to the profitability of investments.

Transactions in foreign jurisdictions

Transactions on markets in foreign jurisdictions, including markets formally linked to a domestic market, may expose you to additional risk. Such markets may be subject to regulation which may offer different or diminished investor protection. Your local regulatory authority may be unable to compel regulatory authorities or markets in other jurisdictions to enforce their rules.

Currency risks

The profit or loss for transactions in foreign currency denominated contracts, whether traded in your jurisdiction or another, will be affected by currency rate fluctuations where there is a need to convert from the contract's currency denomination to another currency.

Trading facilities

Most open-outcry and electronic trading facilities are supported by computer-based component systems for the order-routing execution, matching, registration or clearing of trades. As with all facilities and systems, they are vulnerable to temporary disruption or failure. Our ability to recover certain losses may be subject to limits on liability imposed by the system provider, the market, the clearing house and/or member firms; such limits may vary.

Electronic trading

Trading on an electronic trading system may differ from trading in an open-outcry market as well as trading on other electronic trading platforms. If Hedonova undertakes transactions on an electronic trading system, we will be exposed to risks associated with the system including the hardware and software failure. Any system failure may result in our order not being executed according to instructions or not being executed at all, resulting in potential financial loss.

Off-exchange transactions

In some jurisdictions and only under restricted circumstances, firms are permitted to deal outside of a regulated exchange, or to perform off-exchange transactions. The firm with which we deal may be acting as our counter-party to the transaction. It may be difficult or impossible to liquidate an existing position; to assess value or determine a fair price; or to assess your exposure to risk. For these reasons, these transactions may involve increased risks. Off-exchange transactions may be less regulated or subject to a separate regulatory regime. 

Foreign markets

Foreign markets will involve different risks to Irish markets. In some cases, the risks will be greater. On request, you may be provided with an explanation of the safeguards that will be in place in any relevant foreign markets; including the extent to which we accept liability for the default of a foreign broker with  whom we do business. The potential for profit or loss from transactions on foreign markets or in foreign currency denominated contracts will be affected by fluctuations in foreign exchange rates.

Interest rates

Changes in interest rates can have an effect on the value of securities. The value of securities, especially bonds, can fall when interest rates rise as other investments that reflect the new higher interest rate offer greater returns. This risk can be mitigated by diversifying the durations of fixed-income investments held. Alternatively, if interest rates fall, the value of bonds and other securities may rise.

Fees and charges

It is important that you obtain a clear explanation of all transaction, dealing, third party and ancillary charges as well as  other fees for which you will be liable. These charges will affect your net profit (if any) or increase your loss. You should also ensure that you understand the extent of your exposure to potential loss. 

Taxation

We recommend that you seek independent tax advice before making any investment to ensure that you understand the potential tax implications of acquiring, entering into, holding, and disposing of the relevant investment or transaction (including any applicable income tax, goods and services or value added taxes, stamp duties, and other taxes). Different transactions may have different tax implications and the tax consequences of any transaction are dependent on your individual circumstances and may change in the future. Hedonova does not offer tax advice, and any tax-related information you receive from us should not be construed as tax advice or a tax recommendation. 

Change in investment policy

The manager of a 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 fund from the one in which you originally invested. 

Loss of key personnel

The manager of a 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 fund from the one in which you originally invested. 

Custodial risk

There are risks involved in dealing with the custodians or brokers who hold the investments or settle the trades. In the event of a custodian or broker's insolvency or bankruptcy, the portfolio may be delayed or restricted from recovering its assets or estates, and may only have a general unsecured claim against the custodian or broker for those assets. In recent brokers or other financial institutions insolvencies, the capacity of investors to recover assets from the insolvent estate has been delayed, restricted or hindered, often unpredictably. There is no assurance that any assets held by the Hedonova with a custodian or broker will be readily recoverable. 

Geographic concentration

The fund may be particularly susceptible to economic, political, regulatory, and other events or conditions affecting companies and countries in the geographic regions where the portfolio invests. Currency devaluations could occur in countries that have not yet experienced currency devaluation to date, or could continue to occur in countries that have already experienced such devaluations. As a result, the fund may be more volatile than a more geographically diversified portfolio. 

Growth Securities

Because growth securities typically trade at a higher multiple of earnings than other types of securities, their market values may be more sensitive to changes in current or expected earnings. In addition, growth securities may not perform as well as value securities or the stock market in general at times, and may fall out of favour with investors for varying periods of time.

Emerging markets

Investments in emerging markets entail additional risks associated with political and economic uncertainty, adverse government policies, restrictions on foreign investment and currency convertibility, currency exchange rate fluctuation, higher volatility, inadequate liquidity, possible lower levels of disclosure and regulation, and uncertainties regarding the status, interpretation and application of laws, including those concerning private ownership of assets, expropriation, nationalisation and confiscation. 

Large block transactions

Because a large proportion of Hedonova blocks are held by a small number of investors, the fund faces the risk that these individuals will purchase or redeem units in large amounts frequently or unexpectedly. These transactions could adversely affect the ability of the portfolio to conduct its investment program. For example, they could force us to sell portfolio securities or purchase portfolio securities unexpectedly and incur substantial transaction costs. We may also hold a higher proportion of its assets in cash in anticipation of large redemptions, as well as huge sums in cash pending investment in securities, lowering returns.

Value securities risk

Value securities carry the risk of never reaching what the investment managers believe is their full market value, either because the market fails to recognise the stock’s intrinsic worth or the portfolio managers misjudged it. They may also decline in price, even though in theory they are already undervalued. Because different types of stocks tend to shift in and out of favour depending on market and economic conditions, the portfolio’s performance may sometimes be lower or higher than  other types of portfolios, such as those emphasising growth stocks. 

Significant withdrawal risk

A significant withdrawal of capital from the fund may affect the portfolio and its investors adversely. For example, Hedonova may be required to sell its more liquid portfolio investments to meet a large redemption. The portfolio’s remaining assets may be less liquid, more volatile, and more difficult to price. Hedonova may limit redemptions from the fund (potentially for an extended period of time) and also determine whether to make any such redemptions in cash, in kind, or a combination of both. Any limitation on redemptions may be imposed in response to market factors or actual or anticipated redemption activity, which may occur unpredictably. Investors in the fund may not receive prior notice of any such limitations, and may not receive notice of their imposition for some time after they are imposed. As a result, you may be unable to redeem your investment at any particular time or on the terms you might expect. 

Small and mid-sized companies

Investments in small and medium sized companies often involve greater risks than investments in larger, more established companies because these companies may lack the management experience, financial resources, product diversification, experience and competitive strengths of larger companies. Securities of small and medium companies may trade on the over-the-counter market or on regional securities exchanges and their trading frequency and volume may be significantly lower and more volatile than that of larger companies.

Special situations

Securities of companies that are involved in an initial public offering or a major corporate event such as a business consolidation or restructuring, may present special risk because of the high degree of uncertainty that can be associated with such events. Securities issued in initial public offerings are often  issued by companies that are in the early stages of development, have a history of little or no revenues and may operate at a loss following the offering. It is possible that there will be no active trading market for the securities after the offering, and the market price of the securities may be subject to significant and unpredictable fluctuations. Investing in special situations may have a magnified effect on the performance of portfolios with small amounts of assets. 

Regulatory uncertainty

Recent market events are likely to result in significant regulatory reform, which could have an impact on how the portfolio managers operate their business or pursue client objectives. For example, the US Securities and Exchange Commission took interim emergency measures to prohibit short selling in over 800 financial services companies from September 19 to October 3, 2008, due to market events. Regulators in other countries have taken a similar action. This short sale ban imposed temporary limitations on their ability to fully implement certain investment strategies. There is no guarantee that similar limitations or other regulatory constraints will not be imposed in the future.  

Securities lending

Hedonova may engage in securities lending arrangements in order to enhance its returns. This entails lending securities from the fund's portfolio to counterparties for a set period of time in exchange for the deposit of collateral that the fund can invest to earn additional returns. Such arrangements would expose you to additional credit risk from  the counterparties to the securities lending contracts. In the event that a counterparty fails to meet its obligations and/or the value of the collateral deposited falls below the value of the securities lent, the fund's net asset value will suffer .

Risk of investment in other pools

If Hedonova invests in another fund, it is exposed to the risk that the underlying fund will not perform as expected. Hedonova is  indirectly exposed to all of the risks associated with an investment in the underlying fund. The investment policies and limitations of the underlying fund may not be the same as those of Hedonova; as a result, Hedonova may face additional or different risks, as well as a lower investment return. Hedonova assumes the proportionate risk of an underlying fund pool's expenses in which it invests.

Risks associated with particular asset classes

Equities

Owning equities (shares or stocks) in a company provides an opportunity to participate in the company’s profit and performance, in the form of dividends and capital growth. Individual shares and stock markets can be volatile, especially in the short-term. Some shares are likely to be more volatile than others. This will be based, among other things, on the business, geographic location and size of the company.  Equity investments face a greater risk of significant loss if there is a lack of diversification, such as an over-reliance on stocks in a single company, industry sector or country.

The liquidity of shares is a critical factor. This refers to our ability to realize shares when we so wish. Shares in companies that are not traded frequently can be very difficult to sell. Many shares that are traded on stock exchanges are bought and sold infrequently and finding a buyer may not always be easy.

In positive market conditions equities will tend to be one of the best performing asset classes, while in negative environments there is the potential to lose much of our initial capital.

Note-based products

A note-based product is a hybrid security that typically consists of a debt security combined with a derivative linked to an underlying instrument. Performance will be contingent on the underlying instrument's performance and the coupon available on the debt security.  Investors should also be aware that there is a default risk associated with the debt security which means they could lose some or all of their invested capital.

When we attempt to redeem deposit-based products before their maturity dates, we may be forced to sell at a discount to face value due to illiquidity. Investors should be aware that during the life of the investment, Hedonova bears the credit risk of the financial institution where the capital is on deposit. This means that, even if the investment performs well, we could lose all or some of the  invested principal and any returns if the issuer or guarantor becomes insolvent.

Derivatives

Derivatives are financial instruments; their value is dependent upon or derived from the value of other assets, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial. A relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the portfolio. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the portfolio. Derivative instruments will typically increase the portfolio’s exposure to material risks to which it is already exposed, as well as introduce additional risks such as correlation risk, counterparty credit risk, hedging risk, leverage risk, and liquidity risk. 

Correlation risk is related to hedging risk and refers to the possibility of an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses.

Counterparty credit risk refers to the possibility that a counterparty to the derivative instrument would go bankrupt or otherwise fail to meet its obligations owing to financial difficulties, resulting in the portfolio losing all or part of its investment, with any recovery being delayed.

Hedging risk refers to the risk that derivative instruments used to hedge against an opposing position will offset losses as well as gains. There is no guarantee that a hedging strategy will eliminate the risk that it is intended to offset, which may lead to losses within the portfolio.

Liquidity risk refers to the risk that the derivative instrument will be difficult or impossible to sell or terminate, forcing the portfolio managers to make decisions they would not otherwise make, such as accepting a lower price for the derivative instrument, selling other investments, or foregoing a more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. 

Forward foreign currency contracts

Hedonova may enter into forward foreign currency contracts, which are types of derivative contracts, whereby the portfolio may buy or sell a country’s currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. The contract guarantees an exchange rate on a given date. These contracts, however, will not prevent the portfolio’s securities from falling in value during foreign market downswings. The portfolio may enter into forward foreign currency contracts for risk management (hedging) or investment purposes. The inability of the portfolio to precisely match forward contract amounts and the value of securities involved may reduce the effectiveness of the portfolio’s hedging strategy. Forward foreign currency contracts used for hedging may also limit any potential gain that might result from an increase in the value of the currency. When entering into forward foreign currency contracts for investment purposes, unanticipated changes in the currency markets could result in poor portfolio performance.

Hedonova may designate cash or securities in an amount equal to the value of the portfolio’s forward foreign currency contracts, which may limit the portfolio’s investment flexibility. If the value of the securities declines, additional cash or securities will be so designated. The portfolio may engage in an offsetting transaction at maturity of a forward foreign currency contract and may incur a loss to the extent that there has been movement in forward contract prices. When the portfolio converts its foreign currencies into Canadian dollars, it may incur currency conversion costs due to the spread between the prices at which it is buying and selling various currencies. 

Commodities

The market for trading in commodities is speculative and highly volatile. Prices for commodities are affected by a variety of factors, including changes in supply and demand relationships, governmental programmes and policies, national and international political and economic events, wars and acts of terror, changes in interest and exchange rates, trading activities in commodities and related contracts, weather and agricultural harvest, trade, fiscal, monetary and exchange control policies. The price volatility of each commodity also affects the value of the futures and forward contracts related to that commodity and  its price at any such time. The volatility of commodity prices is significant and often higher than that of equity portfolios. The commodities markets are typically less liquid than markets of equity and interest or currency-related products. Due to market movements, investors may suffer a substantial or even total loss of your investment. 

Direct property investments

Direct property investments seek to benefit from capital appreciation and rental increases to generate returns for investors. These investments will perform well when the economic environment is strong, but in periods of recession, capital values tend to fall. If we dispose of the property when market values fall, we may be forced to sell at a significant discount. Investing in direct properties involves more concentration risk than investing in a diversified property fund, and performance may be negatively affected by specific geographic factors or tenants defaulting. The use of leverage will also affect investment performance.

Real Estate Investment Trusts (REITs)

Hedonova invests in securities of companies operating in the real estate industry and REITs; these portfolios are more susceptible to risks associated with the ownership of real estate and the real estate industry in general. These risks can include fluctuations in the value of the underlying properties, defaults by borrowers or tenants, market saturation, decreases in market rates for rents, and other economic, political, or regulatory occurrences affecting the real estate industry, including REITs. REITs depend upon specialized management skills and may have limited financial resources, less trading volume, and may be subject to more abrupt or erratic price movements than the overall securities markets. They are also subject to the risk of failing to qualify for pass-through of income. Some REITs, especially mortgage REITs, are affected by risks similar to those associated with debt securities investments, such as changes in interest rates and the quality of credit extended.