What does cluster risk mean and how can UnitPlus Business reduce it?

Concentration risk refers to the risk associated with the concentration of investments in a single asset or asset class. If an investor invests their money primarily in a particular asset or asset class and that asset or asset class experiences a negative performance, this can lead to significant losses. Diversification is often recommended as a means of reducing concentration risk, as it spreads the risk by spreading the portfolio across different asset classes and assets.

A cluster risk can also arise in a bank account, as the statutory deposit protection only applies up to €100,000 and funds above this amount are at risk of default if the bank becomes insolvent. By contrast, the investments of the investment funds at UnitPlus Business are broadly diversified so that a cluster risk is significantly reduced.