As published on Wednesday 9th October 2013 on Media Today.

Source: Mr G M Mangion¸ PKF Malta

When individuals invest they do so in the hope of obtaining a return on that investment decision. Therefore they pitch their expected return against the ever-present risk factor and wait for the actual return which they hope will leave them with a profit.

Risk fluctuates according to the financial instrument and in every case is never constant¸ something reaping a profit and other times reaping a loss. Additionally¸ it is a common denominator that investing in financial instruments is not the field for bargain hunts but rather a field for calculated risk played out.

But far from the big corporate players trading in high risk stocks and shares in nanosecond time¸ pension and life investment conjure up images of far less volatile investments with lower risk investments made with reasonable expectation of return. However¸ while popular with retail investors largely for ‘combining fear and hope in one package’^[1] a retirement fund is not a guaranteed income investment and risk of loss is still present since while ‘the financial engineers who put together the guaranteed-income-for-life products did a good job¸(¸¸) in this imperfect world there’s still no such thing as the perfect risk-free investment^[2]’.

As cries of ‘caveat emptor’¸ (let the buyer beware)¸ echoed through history the tables started to turn when it became realised how wide was the rift in the inequality between the buyer and seller power struggle most notably in the financial sphere¸ lending itself to more enhanced efforts at investor protection and ultimately  translating into tones of ‘venditor emptor’-seller beware.

The investors who placed their savings in the ARM fund held bonds¸ which rank among the low-risk products that guarantee a return¸ however right now the same investors have been stripped of nearly all hope that they will ever see any return at all as the fund goes into liquidation.

The Luxembourg ARM fund was suspended in November 2011¸ subsequently refused a license grant by the Commission de Surveillance du Secteur Financier (CSSF)^[3] and recently ordered into liquidation proceedings. This is not a result of bad financial climate or the product performing badly¸ but rather the medium itself which was brought to a halt. Thus while risk typically stems from the fund not performing well¸ however as has been seen there are other risks that could materialise.

It was argued by many that placing the fund into liquidation was not in the investors’ interest¸ however the Court still sealed this damning verdict. Where does this leave the investors?

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