The downside inherent in CPPI products

Constant proportion portfolio insurance (CPPI) products are designed to protect but investors might be better off in cash or guaranteed equity products

Products providing exposure to the upside in equities and protection against falling markets are all the rage in the current environment. The latest and increasingly popular method of supplying these two goals is a process known as constant proportion portfolio insurance (CPPI). It is the basis for products issued by a wide range of well-known names, among them Axa, Halifax and Zurich. But while the marketing and sales machines outline the positives of CPPI, there are some potential downsides. In fact, there is even some research to suggest that CPPI has a limited chance of outperforming ...