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Axa leaves protection open-ended

Axa Investment Managers has established the second series of the Axa capital protected fund, an Oeic that is linked to the performance of the FTSE 100 Total Return index.

The FTSE 100 Total Return index includes dividends, which makes this fund stand out as most structured products linked to the FTSE 100 do not benefit from dividends.

Investors will get their original capital back, less the initial charge, at the end of the six-year investment term or 75 per cent of the highest value of the fund. There is an initial charge of up to 3 per cent which is used to pay initial commission to IFAs.

The fund uses constant proportion portfolio insurance (CPPI). This means that if the value of the index goes up , the value of the CPPI portfolio also rises, although not as much as the index. Similarly if the stockmarket goes down, the CPPI portfolio will also go down but not as much as the index. There is also a lock-in feature which kicks in when 75 per cent of the funds value is greater than the current protected value to protect gains from subsequent market falls.

Investors may find the payment of dividends within a capital-protected product appealing as they can improve the overall return. However Keydatas UK protected growth plan also benefits from dividends but does this by investing in an exchange-traded fund.

However, the Keydata product is not designed to protect the original capital instead it will return 100 per cent of the funds value but locks in 80 per cent of its highest value. As a result some investors may feel it does not have Axas comfort factor of protecting the original investment.

The minimum investment for the Axa product is high at 40,000 compared with the Keydata products 3,000 minimum. Keydata also has the advantage of being eligible for Isas and Pep transfers, while the Axa product is not.

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