What is the primary purpose of risk disclosure in a fund prospectus?

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Risk disclosure in a fund prospectus aims to provide clear information about potential risks so investors can make informed decisions about whether the fund matches their risk tolerance and investment objectives. It explains the kinds of risks the fund faces—market, interest rate, credit, liquidity, currency, and other factors—and how these risks could affect returns, helping investors assess suitability. It does not guarantee returns, nor is it intended to advertise past performance or reveal marketing strategies; those are addressed elsewhere in the prospectus or marketing materials. Regulators require this disclosure to promote transparency and protect investors by presenting a realistic view of potential downsides.