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ETF of the Month – October: How to Read the SRI Risk Indicator in the KID Document
Key takeaways
- SRI (Summary Risk Indicator) is a number from 1–7 in the KID document, where 7 means the highest risk.
- SRI is based on historical volatility and captures market, currency, and credit risk.
- A low SRI does not mean zero risk — even conservative funds are still exposed to inflationary erosion.
- Compare SRI across funds with the same mandate, not across different asset classes.
- Every UCITS fund must have a KID document — it is free and available through your broker or the fund manager's website.
SRI (Summary Risk Indicator) is a number from 1 to 7 in the KID document that summarises the overall risk of a fund — the higher the number, the more volatile and risky the investment. If you overlook this figure, you can easily end up in a fund that does not match your tolerance for fluctuations.
What the KID Document Is and Where to Find It
KID (Key Information Document) is a standardised two-to-three-page summary that every UCITS fund must provide. You can find it for free on the fund manager's website or directly in your broker's platform. For older funds you may still encounter the term KIID — the content is similar, but the newer KID adds a calculation of costs in euros for a specific investment horizon.
How SRI Works Technically
The SRI value derives from two components: market risk (volatility of NAV over the past five years) and credit risk (relevant for bond funds). The regulator combines these results into the final scale. SRI 1–2 is typical for money market and short-term bond funds. SRI 3–4 covers most mixed and diversified global equity funds. SRI 5–7 belongs to sector-specific, leveraged, or regionally concentrated funds — such as semiconductor ETFs listed in the ETF overview.
What SRI Does Not Tell You
- It does not reflect inflation risk — an SRI 1 fund can lose real value even if it does not lose nominally.
- It says nothing about costs (TER) or replication quality.
- It does not capture liquidity risk in small funds with low AUM.
- It does not account for geopolitical or regulatory risks specific to a sector.
How to Use SRI Practically When Selecting a Fund
Compare SRI values across funds with the same mandate — two global equity ETFs should have similar SRI. If one stands out significantly, find out why: different currency exposure, a leverage mechanism, or a different index composition. For a long-term investor with a 10+ year horizon, SRI 4–5 is common; for a short-term cash reserve, look for SRI 1–2. For more on how to approach risk, see What is risk and how to measure it.
This article does not constitute investment advice.
FAQ
What does SRI 5 mean for an ETF?
SRI 5 signals above-average volatility — the fund fluctuates more than the global equity market. Typical for sector ETFs (technology, semiconductors). Suitable for investors with a longer horizon and higher tolerance for swings.
Where can I find the KID document for my ETF?
On the fund manager's website (iShares, Xtrackers, Amundi, etc.) — just enter the name or ticker of the ETF. The KID is also usually available directly in your broker's platform in the product detail section, typically as a downloadable PDF.
Is SRI different from SRRI?
Yes. SRRI was an older indicator under the KIID system, using a scale of 1–7. The SRI in the new KID uses a different calculation method and adds a credit component, but the intuition is similar — the higher the number, the higher the risk.