For the next 12 months, Axa is to cease writing all offshore with-profits bonds business and accept ...
For the next 12 months, Axa is to cease writing all offshore with-profits bonds business and accept only half of that offered onshore.
As of the middle of May this year, the group will cease writing with-profits bond business in the offshore market instead giving investors two with-profits alternatives.
These are the Axa Sun Life Guaranteed Growth Bond, as exclusively reported in Investment Week last week, and a soon-to-be unveiled Defensive Bond, a wrapper around a fund of hedge funds managed by Liberty Ermitage.
In the onshore market, the shift in emphasis is less marked. The group will continue to write with-profits business but will insist that a maximum of 50% of any investment bond business can go into with profits. The balance of any investment would have to be unit-linked.
Peter Webb, a spokesman for the group, said the shift in emphasis did not mark a permanent shift away from with-profits business.
He added: 'What we are doing is what we have always done in controlling the levels of with-profits business we write. Most providers set a tranche of with-profits they would expect to write each year and will operate within those levels.'
This tranche is set at the level of with-profits business the group believes it can successfully digest without reducing its free asset ratio or financial strength. It was not a response to either market volatility or in anticipation of the Sandler Review, according to Webb.
Axa, whose with-profits and distribution bonds are among the bestselling in the market, is writing to advisers to inform them of the decision.
The Defensive Bond, said Christine Hall, offshore marketing manager at Axa, is a single premium offshore investment bond with a minimum investment of £25,000 or the dollar or euro equivalents.
The fund of hedge funds underpinning it is Liberty Ermitage's Asset Selection fund, allocating assets between hedge fund strategies such as merger arbitrage and fixed interest arbitrage and selecting hedge fund managers to invest with.
Created as an alternative to with-profits, the bond aims to return between two and three times the return on cash with low volatility. It has a maximum commission of 6%, the same as was offered on with-profits business. There are two charging structures, one based on allocation rates and the other on quarterly management charges.
Allocation rates are calculated on a scale beginning with 102.5% for investments of £25,000 up to 104% for investments over £250,000.
The other option has an establishment fee of 0.43% as well as a quarterly charge of between 0.25% and 0.14% for the first four years.
Both sets of charges can be reduced through commission sacrifice.
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