With assets under management in excess of £1 billion, Church House Investment Management is a fund and portfolio manager offering specialist services to individuals, financial professionals and institutions for over 20 years.
Welcome to Church House Investment Management
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Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, and the income derived from them, may fall as well as rise and the amount realised may be less than the original sum invested. Church House Investments Limited is authorised and regulated by the Financial Conduct Authority
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Please note, the information provided in this website is aimed at all types of investor and some articles and links may be geared towards non-retail investors (such as professional and institutional investors).
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Accessing information provided on this website does not constitute a recommendation to buy, sell or otherwise trade in all or any of the investments mentioned therein. Please remember that the value of investments and the income you get from them may fall as well as rise and there is no certainty that you will get back the amount of your original investment. Past performance is not a reliable guide to future performance.
Understanding Investment Risk
Helping trustees and administrators make informed decisions
At Church House we believe successful investment management is about effective risk management. To help understanding in this area we explore below some of the different risks associated with investing. As professional investment managers we consider all these risk when constructing diversified portfolios and managing our investment funds.
This is the danger that the value of an investment may not grow at a rate equal to a rise in the cost of goods and services. In this scenario, the purchasing power of the investment is reduced. This can be a particular challenge for cash investment when interest rates fall below the rate of inflation.
To raise capital companies and governments can offer investors a fixed income over a specified period, after which they will return the value of the initial investment or capital. These investments are known as bonds. A danger for bond investors is that the issuer encounters financial difficulties and as a consequence they fail to make income payments or worse still they do not return all of the capital. This is known as credit risk.
Investing often involves holding shares in businesses, either directly or indirectly. The fortunes of those companies are not guaranteed, and if they underperform or fail, the value of the investment in them can fall.
A vital tactic to minimise risk is diversification. Concentration risk is the danger of focusing all or a large proportion of your investment in one area. This might be the nature of the investment, for example, property or a particular country like the United States.
Many trusts use investments as a means of generating an income. It is not uncommon for the income generated by the investments to be supplemented by withdrawals of the capital. Longevity Risk is that the possibility that the money runs out before the need for that income stops.
Interest Rate Risk
Rising interest rates can have a damaging effect on economies, resulting in a knock-on impact for investors. The cost of borrowing for companies’ increases, which in turn puts pressure on profits. In such circumstances, the value of those businesses can be adversely affected. In the case of bonds, if the risk-free rate of interest gets close to the income they are providing, then the value of the investment can fall.
A critical concern when making any investment is access to the money. Liquidity Risk is the danger that you cannot sell an investment at the time it is required. Or that selling comes at a cost either through a reduced price or the imposition of a penalty charge.
The risk here is that investors have exposure to a country or region that is experiencing economic difficulties. This can affect companies operating in the country and the businesses that trade with them.
This is the danger of significant falls across world stock markets that effects the value of almost all forms of investment. This risk is usually associated with major global events such as wars, natural disasters and, in a recent example, a pandemic.