AXA has added a new guarantee option to North, its capital protection product.
The first version of the North product — Protected Growth — gave investors the opportunity to lock in the growth component of the product over 10, 15 and 20-year terms. The new guarantee — Protected Investment — allows investors to insure 100 per cent of the capital component for five and seven-year terms.
AXA head of structured solutions Andrew Barnett said the current environment was creating increased interest in the product, with advisers feeling the tension between protecting capital in a prolonged downturn and taking part in a share market recovery.
Barnett said much of the interest stemmed from investors aged 55-70 years who were focused on asset preservation. Barnett said the product currently has $230 million in funds under management, with around 50 per cent of that amount coming during the last two months.
Barnett named Professional Investment Services and RetireInvest as two groups that currently list the product on their approved list, but Barnett said there are advisers from 106 dealer groups currently writing the product.
But the group did admit there is an education challenge ahead. AXA surveyed a number of advisers regarding the product, and while 79 per cent said providing capital protection is ‘important’ or ‘very important’, only 10 per cent said they were ‘very familiar’ with forms of capital protection.
Barnett said North is the only Australian product that offers dynamic hedging, which allows investors to remain fully invested in growth assets, regardless of market conditions. The group has been using dynamic hedging in the United States since 1996, and said the strategy held up well during the recent market volatility.
North administers superannuation, pension, transition to retirement pensions and ordinary money, with 50 investment options within the guarantee. Contributions, withdrawals and switches are also available through the term. Up to 15 per cent of the original investment can be contributed or withdrawn each year during the term. Lump sums can be accommodated with a fee of 1 per cent to 5 per cent for amounts over the 15 per cent per year limit.
The administration fee ranges from 0.95 per cent to 0.50 per cent depending on the size of the account balance.
The product has been rated by Standard &Poor’s, van Eyk, Lonsec and Aegis.
The group also flagged that it would also be launching a North gearing product in the future.
