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Axa deals in dividends

AXA INVESTMENT MANAGERS

Capital Protected Fund Series 2

Type: Capital-protected Oeic

Aim: Growth linked to the performance of the FTSE 100 Total Return index

Minimum investment: Lump sum 40,000

Isa link: No

Pep transfers: No

Term: Six years

Return: 75% of the highest level of the portfolio during the six-year term

Guarantee: 97-100% of original capital returned regardless of performance of index

Closing date: December 8, 2004

Charges: Initial up to 3%, annual1.2%

Commission: Initial up to 3%, renewal 0.25%

Tel: 020 7003 1234

Axas capital protected fund is an Oeic which is linked to the FTSE 100 Total Return index. It will provide the greater of the original capital less the initial charge or 75 per cent of the highest fund value.

Independent Personal Financial Management director Luke Gibbon feels that the product has a number of good features. He says: “First, it is an equity-based investment with the initial capital less charges protected. As the fund value grows, additional protection is provided to ensure the final payment is 75 per cent of the highest portfolio value.”

Gibbon points out that the fund is linked to the FTSE 100 Total Returns index which includes dividends. He believes the inclusion of dividends could make a significant difference to the return over the longer term and points out that most structured products do not include dividends.

Gibbon says: “The investment strategy increases equity exposure in rising markets and reduces exposure in falling markets. The investment vehicle of an Oeic gives it flexibility and unlike many structured products, it will not need a matched buyer if a client wants to sell.”

Turning his attention to the less attractive characteristics of the fund Gibbon says: “The key features is littered with initials which makes it difficult to read. The main drawback of the product is the minimum investment of 40,000 as this will preclude most private investors. As with any product that provides capital protection, there is a cost and this will limit the upside potential.”

Gibbon suggests that an income option would have been useful but adds: “However, this is partly offset by there being no penalty on full or partial sale.” He expects other structured products such as Zurichs guaranteed capital account to provide the main competition.

In conclusion Gibbon says: “Overall, I like the product but feel the minimum investment means it is unlikely that I will use it for my clients.”

BROKER RATINGS:

Suitability to market: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average

Overall 8/10

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