INVESTOR’S GUIDE OVERVIEW OF FINANCIAL INSTRUMENTS AND PRODUCTS AND THEIR INHERENT RISKS

INVESTOR’S GUIDE OVERVIEW OF FINANCIAL INSTRUMENTS AND PRODUCTS AND THEIR INHERENT RISKS

OVERVIEW OF THE CATEGORIES OF RISK INHERENT 
IN FINANCIAL INSTRUMENTS AND PRODUCTS

Pursuant to the Markets in Financial Instruments 
Directive 2004/39/EC (MiFID), which entered into force 
on 1 November 2007 and was repealed and replaced by 
Directive 2014/65/EU on markets in financial instruments 
(MiFID II), which entered into force on 3 January 2018, 
BGL BNP Paribas has written this description of investment 
instruments and products which enables you to assess 
the main characteristics and risks inherent in investing in 
certain categories of financial products and instruments.
First, the recommended investment universe and the 
investment services
BGL BNP Paribas offers investment advisory and discretionary 
asset management services (on a non-independent basis) as 
well as the reception and transmission of orders (RTO), the 
conditions of which are outlined in the current prospectuses 
available on request from your advisor.
We offer our recommended investment universe as part of 
our investment advisory services. The following principles 
are used to select and monitor the financial instruments 
within our recommended investment universe: appropriate 
and documented selection and monitoring of financial 
instruments and issuers; analysis of the risks, complexity 
and cost of the financial instruments, as well as the 
profits they generate; and implementation of a personal 
recommendation process (excluding RTO). 
The recommended universe may include financial 
instruments issued, placed or distributed by the Bank or 
other entities with close legal and economic ties to the 
Bank or the BNP Paribas Group, as well as the financial 
instruments of third parties.
The financial instruments 
This description gives a general overview of the main 
types of risk you may encounter while investing in the 
different families of financial instruments or products 
(excluding foreign exchange (FX) spot, physical precious 
metals and physical real estate). It supplements various 
specific documents that are tailored to each family of 
financial instruments or products, entitled “Invest in...” and 
comprising three parts: Understand, Evaluate and Select. 
These documents are available from your advisor depending 
on your potential needs regarding financial knowledge.

Of course, all the risk elements mentioned should not 
obscure the numerous opportunities offered by the variety of 
available investment instruments and products to increase 
the value of your assets. Generally speaking, the relationship 
between risk (of loss or lack of profits) and expected return 
is an important concept to guide your choices and build 
a portfolio corresponding to your needs and investment 
objective.
We recommend that you carefully read the various documents 
on each family of investment products that is of relevance 
to you, so that you have the required information on each of 
them. In this way, we will be better able to support you in 
your investment decisions and advise you, while informing 
you as efficiently as possible.
The purpose of these documents is not to exhaustively cover 
all the categories of financial instruments or all the risks 
inherent in investing in said financial instruments.
It should be emphasised that a minimum investment duration 
which fits your personal investment horizon is assigned to 
most of the individually considered investment products. 
This is particularly true for products that have a maturity 
guarantee, even if they offer interim liquidity by allowing you 
to request a redemption with profit before maturity.
Furthermore, we would like to draw your attention to 
the fact that you must carry out your own analysis of the 
financial, legal, accounting, fiscal and regulatory aspects 
of each transaction in financial instruments to be able to 
determine its advantages and disadvantages, and to assess 
related risks over the entire investment period.
Finally, we would like to remind you that it is indispensable that 
you avoid concentrating your investments, and are committed 
to building a portfolio comprising a sufficiently large number 
of items and products. Portfolio diversification presents a good 
opportunity for risk mitigation in many market scenarios.

THE DIFFERENT CATEGORIES OF RISK

In order to familiarise yourself with a number of 
risks, you will find below the main risks inherent in 
investment instruments and products.
1 Foreign exchange risk
Where an investor buys or sells a currency, or instruments 
denominated in a currency other than the reference currency, 
in addition to the risks inherent in the transaction itself, an 
additional risk of gain or loss arises from movements in the 
exchange rate used in relation to the reference currency.
2 Risk of changes in net asset values or prices
The risk of changes in net asset values or prices exists in all 
financial markets. The price of a financial instrument is the 
result of the balance between supply and demand on the 
market. The price might be subject to unforeseen fluctuations 
involving risk of loss. Furthermore, the volatility historically 
displayed by a particular instrument may change over time, 
even without extreme conditions intervening.
Irrational factors, either market factors or factors specific 
to a particular security, taken individually, can affect overall 
movements in prices, for example trends, announcements, 
opinions or rumours that may lead to unforeseen but sudden 
and large reductions in price, even though the financial 
situation and prospects of the businesses that underlie the 
investment involved may not have changed unfavourably. 

3 Interest rate risk
Movements in interest rates expose the fixed interest rate 
investor to the risk of loss of capital. Even if the issuer 
scrupulously respects the issue terms, just a rise in market 
interest rates can lead the investor to suffer a loss or miss 
out on profit. As a general rule, increases in interest rates 
tend to lower the price of those financial instruments that 
are sensitive to rates to a greater or lesser extent, such as 
fixed interest bonds and certain structured products, while a 
reduction in rates has the opposite effect.
4 Inflation risk
Inflation can lead to a loss in value of your investments and 
a reduction of purchasing power of the capital invested if 
the inflation rate exceeds the return yielded by the financial 
instruments.
5 Market liquidity risk
For the investor, liquidity means the opportunity to sell the 
financial instruments that they hold, at any time and at a 
satisfactory price. In the event of low or insufficient liquidity, 
the investor may have to sell at a much reduced price or 
even, in extreme cases, be unable to sell part or all of their 
financial assets at any given moment.

INVESTOR’S GUIDE OVERVIEW OF FINANCIAL INSTRUMENTS AND PRODUCTS AND THEIR INHERENT RISKS