Risk management

In order to minimise primary risks as much as possible, the Fund operates according to two key elements:

Diligent selection of partners and close monitoring of their progress

LMDF and its investment adviser ADA form a team with over 35 years of experience in microfinance and created together an eight-step selection process. Additionally, is rigorous due diligence has been put in place to ensure that only emerging MFIs with a solid track record are included in the investment portfolio. Monitoring is also done quarterly as well as annually on-site to ensure that these institutions are moving in the right direction.

Rigorous diversification of risks

We apply a strict risk diversification framework, which ensures that the Fund is never too exposed to individual MFIs, nor to country risks. We never invest more than 5% of the Fund in a single MFI and we never invest more than 15% of the Fund in a single country. This ensures that the impact remains manageable for the Fund in case things go wrong.

Unique protection against risks

Investments in Class C shares (class open to individuals and non-profit structures) benefit from a risk protection mechanism. If a microfinance institution does not reimburse the Fund, Class C investors are protected by an initial absorption of losses through Class A shares subscribed by the Luxembourg government and Class Abis subscribed by ADA.

Class A and Class Abis shares must always constitute at least 20% of Class C shares, which means that we can lose at least 1/5 of our entire (diversified) portfolio before you start to lose money as a Class C investor.

The mechanism has been specially designed to allow you as an investor to invest in microfinance even without in-depth knowledge.

How to invest?

Evolution of the NAV per Class C Share

0.5%

Financial return for investors in Class C Shares