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Architas tips the balance

Axa Group’s multi-manager arm Architas has established two funds of funds that aim for a degree of capital protection through a time invariant portfolio protection investment strategy.

The TIPP strategy is similar to constant proportion portfolio insurance. It works by shifting asset allocation between risky assets such as equity funds and less risky asset classes such as money market instruments in line with market conditions. In a rising market, exposure to the risky assets will increase and will be reduced in favour of the less risky assets when markets decline.

Using the TIPP strategy, the funds aim to protect 70 and 80 per cent of their highest ever share prices respectively. However, the protection provided by the TIPP strategy is only a safety net and should not be confused with a capital guarantee.

As the market rises, the funds’ share prices also increase. If the share prices climb above their previous highest ever share price, the level of protection will also increase.

The funds may be of interest to supporters of the multi-manager approach who do not want to be permanently exposed to market risk, but who still want participation in market growth.

To maintain the protected price, it may be necessary to invest 100 per cent in less risky assets, so growth may not be as high as funds that do not have a TIPP strategy. The strategy could also fail if markets fell so quickly that the portfolio could not be re-balanced in time.

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