When it comes to alts in VAs, advisers not DIYers: Jackson National

Some 40% of new flows are going in Guidance Portfolios, a packaged strategy; 'counter-correlated sleeve'

Jul 16, 2012 @ 1:11 pm

By Darla Mercado

Financial advisers using Jackson's variable annuity appreciate the benefits of adding alternatives, but many would prefer to leave the portfolio creation and management to experts.

Some 40% of flows into Jackson National Life Insurance Co.'s Elite Access variable annuity are going toward the insurer's “Guidance Portfolios,” one of several prepackaged alternative investment strategies available to clients. Options within that list of portfolios include “Maximum Growth,” which comprises allocations to natural resources and real estate funds, and “Balanced Income.” That offering includes investments in global stock, high-yield bonds and emerging market debt. There are also options for mostly or all-alternative portfolios. The Curian Guidance Institutional Alt 65 has 65% of its assets in alternatives. The Institutional Alt 100 is fully invested in them.

Clifford Jack, Jackson's head of retail, said that in addition to a solid chunk of new dollars going into prepackaged strategies, many financial advisers are selecting Institutional Alt 100. In fact, it's the most popular underlying investment in Elite Access.

At the same time, advisers can choose individual fund options from Jackson's array of 40 investments, including a dozen alternative strategies. There are a few DIY advisers who may prefer to use a long-short fund within a tax-deferred vehicle, Mr. Jack said.

Polls of 2,190 advisers at Jackson's road shows this March indicated that though 24% of participants placed less than 5% of clients' assets toward alternatives, 95% expected that their use of these investments would rise over the next year. Even more telling: More than three-quarters of those polled said they would be more likely to use alternatives if the investments were offered in a guided strategy.

The observations suggest that advisers recognize there is a place for alternatives in clients' investment holdings, but many would prefer to leave the dirty work of figuring out the asset allocation and managing the holdings to experts.

“Those advisers choosing the Guidance Portfolios believe it's in their best interest to let us make the asset allocations,” said Mr. Jack. “Whether they're selling exchange-traded funds or mutual funds, they're using this VA as a counter-correlated sleeve for a percentage of assets.”

More advisers appear to be willing to eat their own cooking as they learn more about how to use alt strategies, Mr. Jack said, adding that, generally, the first ticket advisers write when they're trying a new variable annuity is their own. “The educational piece [on alternatives] has led to a significant portion of first tickets being adviser assets,” he said.

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