Prospectus - Manulife Insurance Berhad

chapter2 RISK FACTORSpage192.2 Specific Risks related to the Fund (cont’d)c) Concentration riskConcentration risk occurs when a portfolio is overweight on a particular security, sectoror asset class. In scenario where the Fund invests a substantial portion of its assets insecurities within a particular sector, it may be subject to greater price volatility or adverselyaffected by the performance of the securities of that particular sector.The risk may be mitigated through the diversification process that the Manager willemploy in the management of the Fund.d) Country riskas this Fund may invest in foreign markets, this Fund will be exposed to the risks applicableto the countries that it invests in. The Manager will give due consideration to the riskfactors such as currency stability, political, regulatory, legal and economic environmentbefore any investments are made in the foreign country.e) Currency riskThis risk is associated with investments denominated in currencies different fromthe base currency of the Fund. As the Fund is denominated in Malaysian Ringgit,investments in foreign markets will cause the Fund to be exposed to currencyrisks. When foreign currencies move unfavourably against Malaysian Ringgit, theseinvestments may face currency loss in addition to any capital gains or losses, whichmay affect the NAV of the Fund, and consequently the unit price of the Fund. Suchmovements in the foreign currency rates will also impact the amount of income thatthe Fund may be able to declare.The Manager may manage this risk by hedging the foreign currency exposure.f) Derivatives riskDepending on the prevailing market circumstances at a particular point in time, theManager may choose to use financial derivatives to hedge against currency movements.While the use of derivatives can be beneficial, it also involves special risks, including butnot limited to:- the risk of derivative transactions having the effect of increasing the volatility of theFund’s NAV;- the risk of loss from default by the counterparty, typically as a consequences ofinsolvency or failed settlement; and- the risk of the supply and demand factors in the derivatives market and in otherrelated markets impacting the liquidity of the derivatives market adversely, which inturn would adversely affect derivatives pricing and the Fund.To mitigate these risks, all investment in derivatives will be closely monitored.Prospectus in respect of the Manulife Shariah - Dana Ekuiti