AXA Investment Managers has structured its first investment product in the U.K. using a UCITS III wrapper. The product uses equity swaps to give exposure to the FTSE100, and is believed to be only the second such deal in the U.K. to use this wrapper. The Undertaking for Collective Investments in Transferable Securities, or UCITS, allows funds structured in one European Union country to be traded elsewhere in the E.U.
The product was a one-off, structured for the distributor Smith & Williamson, said Vincent de Martel, director in structured and alternative investment management at AXA in London. The product, which matures in December 2009, is structured using constant proportion portfolio insurance.
The CPPI structure provides a formula for dynamically allocating investments between 'risky' assets such as equity, and 'safe' assets such as government bonds.
AXA is considering structuring further UCITS III funds and pitching these to independent financial advisors as an alternative to with-profits, long-term savings policies. The deal AXA structured for Smith & Williamson had been in construction for over six months, said De Martel. "It was a learning process for the FSA, [Financial Services Authority] as well as for us."
The appeal of the product is its liquidity, said De Martel, noting that the UCITS wrapper requires the issuer to invest in assets that can be easily liquidated.
