Every investment involves some risk. However, the level and type of risk will vary depending on the fund your savings are invested in.


General investment risks

Here are some factors that may cause a fund's value to move up and down:

Market risk

Risk that the market value of investments may change due to a number of factors. These can include changes in economies, world events (such as pandemics), environmental events, climate change, the performance of individual entities, regulatory changes, investor sentiment, political events, inflation, and interest and currency exchange rates.

Currency risk

Risk that changes in currency exchange rates will affect the value of the fund. Investments denominated in foreign currencies are exposed to currency risk. For example, for a fund with foreign currency exposure, if the New Zealand dollar increases in value against a given foreign currency, all else being equal, the New Zealand dollar value of the fund will fall.

Liquidity risk

Risk that an asset cannot be sold at the desired time or at a reasonable value. Liquidity risk may impact your ability to withdraw, transfer or switch your investment.

Active management risk

Risk that arises from the Investment Manager ANZ Investments, or external fund managers’, active management of investments.

As an active manager, ANZ Investments makes decisions about what proportion of each asset class to hold, what investments to hold, and the level of currency exposure. If ANZ Investments, or the external fund managers choose investments that underperform, the value of the fund may fall.

Derivative risk

Risk that arises from the use of derivatives where the value is derived from the performance of another asset, or index (such as a share market index), an interest rate or an exchange rate.

For example, investment losses could be caused by changes in the value of the underlying assets, indices or rates.

Asset allocation risk

Risk of changes in the value of the fund due to exposure to riskier assets. Funds that invest in more growth assets (such as equities, listed property and listed infrastructure) may go up and down in value more over the short term, than funds that invest in more income assets (such as cash and cash equivalents, and fixed interest).

It's also important to understand your own attitude to risk. For more information, talk to your financial adviser or work out your risk profile at the Sorted website.