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Due to the potential for losses, the Financial Conduct Authority (FCA) considers unregulated collective investment schemes to be high risk.

What are the key risks?

1. No guaranteed return or capital protection

  • If this investment fails, there is a risk that it will take some time to return capital to you. You may also get back less than you invested. 
  • Advertised rates of return aren’t guaranteed. This is not a savings account. If the issuer doesn’t pay you back as agreed, you could earn less money than expected or nothing at all. A higher advertised rate of return means a higher risk of losing money. If it looks too good to be true, it probably is. 

2. You are unlikely to be protected if something goes wrong

  • The Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover investments in unregulated collective investment schemes. You may be able to claim if you received regulated advice to invest in one, and the adviser has since failed. Try the FSCS investment protection checker.
  • 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.

3. You are unlikely to get your money back quickly

  • This type of investment fund could face cash-flow problems that delay payments to investors. It could also fail altogether and be unable to repay any of the money owed to you.
  • 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.
  • You may have to pay exit fees or additional charges to take any money out of your investment early.

4. This is a complex investment

  • This kind of investment has a structure typically used for professional clients and institutions. 
  • This makes it difficult to predict how risky the investment is, but it will most likely be high.
  • You may wish to get financial advice 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.

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