In another example of the variable annuity trend du jour, Jefferson National Life Insurance Co. has bolstered its roster of alternative-investment offerings.
The insurer, which offers a flat-fee variable annuity aimed largely at the fee-only registered investment adviser set, said Monday that it's adding a slate of funds that will use derivatives and dynamic asset allocation to the investment options available to VA owners.
“A growing number of RIAs and fee-based advisers are using alternatives to achieve greater diversification and downside protection in this challenging market,” said Laurence Greenberg, president of Jefferson National “But for many advisers, tax-inefficiency can be a big barrier to using alternatives.”
Jefferson National isn't the only one playing up alternatives and the tax benefits of variable annuities in an attempt to cater to sophisticated clients and advisers.
Fidelity Investments Life Insurance Co. recently added some alternative-investment choices to its VA, while MetLife Inc. is giving customers access to commodities via new fund options.
In 2011, insurers added 102 VA subaccounts that use alternative strategies, which include currencies, long-short, market-neutral and precious metals, according to Morningstar Inc. That's up from 63 new additions in 2010. Those numbers don't include commodities.
Jefferson National's new alternative strategies include the Invesco VI Balanced-Risk Allocation II from Invesco Ltd., which may invest in derivatives, futures and swap agreements.
In an attempt to keep a lid on volatility, Jefferson National also is adding the Legg Mason Dynamic Multi Strategy Variable Insurance Trust II, which includes a strategy that shifts to cash when the market becomes rocky.
A new addition from Janus
Capital Group, the Janus Aspen Protected-Growth Portfolio, aims to cap market losses at up to 20% and may invest in derivatives. Further, the Power Income VIT from W.E. Donoghue & Co. utilizes a tactical-asset- allocation strategy by using high-yield bond funds and money markets.
Other off-the-beaten path strategies that Jefferson National expects to add include the Hatteras Alpha Hedged Strategies Fund, which offers contract holders exposure to hedge fund strategies including long-short equity and managed futures, and the BCM Decathlon Series from BFP Capital Management. The latter utilizes a trio of quantitative strategies using 107 exchange-traded funds.
