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S&P backs AXA's guaranteed North product
S&P Fund Services has rated AXA’s North personal superannuation and pension-protected growth and protected investment guarantee as ‘very strong’.
S&P says the rating “reflects a product well designed for the needs of the target investor and a superior capital-protection structure.”
The North product features capital-protection, which is an optional guarantee that investors can purchase which helps to mitigate downside risk in both the capital-accumulation and income phases of the investment lifecycle, according to S&P.
“A common criticism of capital protection is that it is of limited value over the longer term,” said S&P Fund Services analyst Rodney Lay.
“At S&P, we take the view that the capital protection for the North product represents an insurance policy against downside risk and the particularly significant issue of market-exit timing and income-sequencing risk for investors/pensioners in the drawdown stage. Like most insurance policies, the insurance has value irrespective of whether the holder ultimately makes a claim or not,” Lay said.
However, these benefits may come at the cost of high fees, depending on the term and investment strategy selected, Lay said. North costs are competitive when both direct and indirect costs of alternative capital-protected structures are assessed, he added. “North may be best suited to several types of investors: risk-intolerant investors, accumulation-stage investors concerned about longevity or lifestyle risk, and investors in the latter stage of their investment lifecycle who want an insurance policy against market-exit timing,” Lay said.
AUTHOR
Mike Taylor
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