RISK
WARNINGS

What is volatility, and how might it affect my portfolio?

The value of investments can rise and fall over time. These movements are known as volatility. Volatility reflects how much, and how quickly, the price of an investment can change, and it can be influenced by a wide range of factors. These include changes in the macroeconomic environment such as interest rates, inflation, or geopolitical events, as well as factors specific to a particular company, sector, or asset class.

Periods of higher volatility may result in sharper or more frequent price movements, including short-term losses. While volatility is a normal part of investing, it can affect the value of your portfolio, particularly over shorter time horizons.

Different types of investments can experience different levels and sources of volatility.

• Shares (equities) - Shares represent ownership in a company, and their value is driven by the company’s performance and market expectations about its future prospects. Share prices can be volatile, particularly over short periods, and may be affected by company-specific news, earnings announcements, competitive pressures, or broader market sentiment.
• Exchange Traded Funds (ETFs) - ETFs are investment funds that trade on an exchange and typically aim to track the performance of an index or asset class. While ETFs provide diversification, their value can still fluctuate in line with the underlying assets they track. ETFs may also be affected by market liquidity, tracking error, and, in some cases, currency movements if the underlying assets are priced in a foreign currency.
• Money Market Funds (MMFs) - Money Market Funds aim to preserve capital and provide liquidity by investing in short-term, high-quality debt instruments. While MMFs are generally less volatile than equities or longer-dated bonds, they are not risk-free. Their value may be affected by changes in interest rates, credit risk of issuers, or stressed market conditions. In extreme circumstances, MMFs may experience losses or restrictions on withdrawals.
• Exchange Traded Notes (ETNs) - ETNs are debt instruments issued by a financial institution that track the performance of a reference index or asset. Unlike ETFs, ETNs are not backed by underlying assets and carry issuer credit risk. This means the value of an ETN depends not only on the performance of the reference index, but also on the financial strength of the issuer.
• Exchange Traded Commodities (ETCs) - ETCs are designed to track the price of a specific commodity or basket of commodities. Commodity prices can be highly volatile and may be influenced by supply and demand dynamics, geopolitical events, weather conditions, and changes in global economic activity. ETCs may also carry additional risks depending on their structure, such as counterparty risk or costs associated with rolling futures contracts.
• Private Market investments and LTAFs - Private market investments, including Long-Term Asset Funds (LTAFs), do not trade continuously on public markets and are not priced daily in the same way as listed securities. As a result, these investments may appear less volatile on a day-to-day basis. However, this does not mean they are lower risk. Valuations are typically updated periodically and may change significantly when assets are revalued or realised. Losses may become apparent over longer periods rather than through frequent price movements.
• Venture Capital Trusts (VCTs) - VCTs invest in small, early-stage companies, which are often higher risk and can experience significant changes in value. While VCT shares are listed, their prices may be volatile and may not always reflect the underlying net asset value, particularly where market liquidity is limited.VCT performance can be affected by company failures, changes in market sentiment towards smaller companies, and changes in tax or regulatory treatment.

What is the liquidity of the investments in Sidekick's portfolios?

Liquidity refers to how easily an investment can be bought or sold without significantly affecting its price. More liquid investments can typically be sold more quickly, whereas less liquid investments may take longer to sell, particularly during periods of market stress.T

he liquidity of investments held within Sidekick portfolios varies by asset type and market conditions.

• Shares (equities) - We deal in both fractional and whole shares. This allows portfolios to be constructed with lower overall investment sizes, as some large global companies trade at high share prices. Fractional shares allow ownership of less than one whole share, up to 4 decimal places. While fractional shares function economically in the same way as whole shares, there is a limited external market for transferring fractional holdings. This means that fractional positions must be sold before closing an account. The liquidity of shares depends on factors such as market conditions, trading volumes, and the size of the company. Shares in large, well-established companies are generally more liquid than those in smaller or less frequently traded companies.
• Exchange Traded Funds (ETFs) - ETFs are traded on public exchanges and can usually be bought or sold during market hours. Their liquidity depends on both the trading volume of the ETF itself and the liquidity of the underlying assets it holds.In normal market conditions, most widely used ETFs are considered liquid. However, during periods of market disruption, spreads may widen and execution prices may be less favourable.
• Money Market Funds (MMFs) - Money Market Funds aim to provide a high level of liquidity by investing in short-term, high-quality instruments. Under normal conditions, MMFs allow investors to redeem units on a daily basis. Within a Sidekick portfolio, funds are retuned alongside the other assets in the portfolio, so this may take slightly longer. Also, liquidity is not guaranteed. In stressed market conditions, MMFs may apply liquidity management tools such as redemption delays or restrictions, in line with fund rules and regulatory requirements.
• Exchange Traded Notes (ETNs) - ETNs are debt instruments issued by financial institutions and traded on an exchange. Liquidity in ETNs depends on market demand and the willingness of the issuer or market makers to provide prices. In some circumstances, ETNs may be less liquid than ETFs tracking similar exposures, particularly during periods of market volatility or if the issuer reduces secondary market support.
• Exchange Traded Commodities (ETCs) - ETCs are designed to track the price of individual commodities or commodity baskets. Their liquidity depends on the structure of the ETC, trading volumes, and conditions in the underlying commodity markets. Commodity markets can experience periods of reduced liquidity or sharp price movements, which may affect the ease and price at which ETCs can be bought or sold.
• Private market investments and LTAFs - Some Sidekick portfolios may include access to private market investments, such as Long-Term Asset Funds (LTAFs), which invest in assets like private equity, private credit, or infrastructure. These investments are inherently less liquid than publicly traded assets. Redemptions may only be available at set intervals, may be subject to notice periods, or may be limited or suspended altogether in certain circumstances. Investors should be prepared to commit capital for longer periods and may not be able to access their money when they wish.
• Venture Capital Trusts (VCTs) - VCTs invest in small, early-stage companies and are generally intended to be held for the long term. While VCT shares are listed, secondary market liquidity is often limited, and investors may not be able to sell shares quickly or at a favourable price. Liquidity in VCTs can vary significantly depending on market conditions and investor demand.

What execution venues do you use?

Sidekick executes trades across a range of execution venues, depending on the type of instrument being traded and prevailing market conditions. The majority of trading takes place on regulated global exchanges.

Most listed shares, ETFs, ETNs, and ETCs are traded on regulated exchanges. These venues provide transparent pricing and centralised order matching, which can support liquidity and efficient execution under normal market conditions. Examples of regulated exchanges include major UK, US, and international stock exchanges.

OTC trading refers to transactions that take place directly between a buyer and a seller, rather than on a public exchange. OTC trading is commonly used for certain instruments, including some ADRs, GDRs, ETNs, ETCs, and less liquid securities. Some companies and instruments trade OTC because they do not meet, or no longer meet, the requirements for a formal exchange listing, or because OTC execution offers better liquidity or pricing in specific circumstances. Sidekick may execute trades OTC where appropriate and where it believes this supports best execution for clients.

When selecting an execution venue, Sidekick takes reasonable steps to achieve best execution on behalf of clients. This means considering factors such as price, costs, speed, likelihood of execution and settlement, size of the order, and market impact.The relative importance of these factors may vary depending on the instrument being traded, market conditions, and the nature of the order.

What are some of the general risks of investing?

• Capital risk - The value of investments can fall as well as rise, and you may get back less than you invest. In some cases, an investment may lose most or all of its value.
• Company, issuer and risk - If a company, fund, or issuer experiences financial difficulty or fails, investors may receive little or no return. Shareholders and fund investors are typically lower in priority than creditors in the event of insolvency.
• Market risk - Financial markets can move sharply due to changes in economic conditions, interest rates, inflation, geopolitical events, or investor sentiment. These movements can affect both public and private investments.
• Asset class and strategy - Different asset classes and investment strategies carry different levels and types of risk. Equities, private market investments, and alternative assets are generally considered higher risk than cash or cash-like investments, though they may offer higher long-term return potential. Risk levels can vary significantly within an asset class.
• Liquidity risk - Some investments cannot be easily sold or redeemed, particularly private market investments and certain listed products with limited secondary markets. You may not be able to access your investment when you want, or at a price you expect.
• Valuation risk - Private market investments are not priced continuously and may be valued using models or estimates rather than observable market prices. As a result, reported valuations may change significantly when assets are revalued or realised.
• Currency risk - Investments denominated in foreign currencies are subject to exchange rate movements. Currency fluctuations can increase or reduce returns when measured in your home currency. Sidekick may hold assets or cash balances in currencies such as USD as well as GBP as part of normal operations.
• Credit and counterparty risk - Some investments, including bonds, money market funds, ETNs, ETCs, and private funds, rely on the ability of issuers or counterparties to meet their obligations. If an issuer or counterparty fails, this may negatively affect the value of the investment.
• Regulatory and tax risk - Changes in regulation or tax treatment may affect the value, structure, or expected benefits of certain investments, including VCTs and private market funds.

How can risk be managed?

All investing involves risk, and it is not possible to eliminate risk entirely. If you are not comfortable accepting the risk of potential loss to your capital, investing may not be appropriate for you.

Sidekick does not provide personal investment advice. If you are unsure whether investing, or a particular investment, is suitable for your circumstances, you should consider seeking advice from an independent financial adviser.

That said, there are some general principles that investors commonly use to help manage, though not eliminate, investment risk.

1. Diversification – Spreading investments across different asset classes, sectors, regions, and investment types can help reduce exposure to risks affecting any single investment or part of the market. Diversification may help smooth returns over time, but it does not guarantee profits or protect against losses.
2. Time horizon – Investing over a longer time horizon can allow portfolios more time to recover from market downturns. Short-term market movements can be unpredictable, and investments intended for shorter timeframes may be more exposed to volatility.
3. Understanding investment types and liquidity – Different investments carry different risk profiles, liquidity characteristics, and time commitments. For example, private market investments and VCTs are typically higher risk and less liquid than publicly traded assets and may require a longer-term commitment.Understanding how and when you may be able to access your money is an important part of managing risk.
4. Portfolio monitoring and rebalancing – Over time, market movements can cause a portfolio’s asset allocation to drift from its intended structure. Periodic monitoring and rebalancing can help maintain alignment with the portfolio’s objectives and risk profile, although this does not prevent losses.

Do I need to pay tax on my investments?

The tax treatment of investments depends on the type of account you use, the investments you hold, and your individual circumstances. Tax rules can also change in the future.

If you hold investments within an ISA, any income or capital gains generated within the ISA are generally not subject to UK income tax or capital gains tax.If you hold investments within a General Investment Account, you may be required to pay tax on income, dividends, or capital gains, depending on your circumstances and applicable allowances.

Certain investments, such as Venture Capital Trusts (VCTs), have specific tax rules and conditions attached. The availability and value of any tax reliefs depend on meeting those conditions and your individual circumstances.Sidekick does not provide tax advice. If you are unsure about the tax treatment of your investments, you should consider seeking advice from a qualified tax adviser.

Income and distributions

Do I receive income from my investments?
‍Some investments may generate income, such as dividends or interest, while others may focus primarily on capital growth. Whether you receive income, and how it is treated, depends on the type of investment and how it is structured.

‍Dividends and fund distributions
Shares and some funds may pay dividends or distributions, but payments are not guaranteed and may change or stop at any time. Some funds automatically reinvest income rather than paying it out.

‍Money Market Funds and interest-based investments
Money market funds and similar investments may generate returns through interest earned on underlying assets. These returns may be reflected in the unit price or distributed, depending on the fund structure.

‍Private market investments and VCTs
Private market investments and VCTs typically focus on long-term capital growth. Income, where it occurs, may be irregular and is not guaranteed.

Details of any income received will be reflected in your account statements. Sidekick does not guarantee income payments and does not control whether companies or funds choose to make distributions.

Corporate actions

Corporate actions are decisions taken by companies or fund managers that may affect investors. These can include events such as mergers, share splits, fund restructures, or changes to investment terms.

Some corporate actions may require a response from investors, while others are processed automatically. Where applicable and permitted, Sidekick will process corporate actions in line with the relevant terms and your account agreement.

Not all corporate actions offer investor choice, and outcomes may vary depending on the investment structure.