Wallflowers no more, investors demand more alternative strategies

The search for new sources of retirement income and exposure to investments that don't correlate with traditional asset classes has brought about new product innovations — many of them sparked by individual investors wanting to invest like institutions. “There's more interest in alternative strategies,” said David Giunta, president and chief executive of Natixis Global Associates. “Before, people shied away form them. They want them now.” He was featured yesterday on a panel entitled “The Next Generation of Income Strategies” at InvestmentNews' annual Retirement Income Summit in Chicago. “You see this shift in preferences,” said Jeff Holland, executive vice president and head of capital markets at Cole Real Estate Investments. “We see it in insurance, in options-based strategies,” he said. “We've had tremendous asset raising over the last few years for safe, high-quality commercial real estate.” Apparently, advisers' business models can also guide product creation, as the firm is eyeing a second- or third-quarter release of a no-fee non-traded REIT. In comparison, the traditional product has a 7% upfront commission for the financial adviser selling it, Mr. Holland explained. The new product will be priced every day at net asset value and “look and feel like a mutual fund,” he said. The first product going into the fee-based wrapper will be a new take on a commission product that offers a 6.5% income stream, Mr. Holland said. At Allianz Life Insurance Co. of North America, product innovation meant tackling two different purposes in its Retirement Pro variable annuity: a need for retirement income and the need to invest for tax-deferred growth, said panelist Robert DeChellis, president and chief executive of Allianz Life Financial Services LLC. The insurer's VA base account, which is growth-focused and doesn't offer income, costs 30 basis points. When clients want to start adding income components, they can buy the ‘Income Advantage,' which allows clients to lock in their benefit base on a quarterly basis for 100 basis points, Mr. DeChellis explained. The insurer is at the drawing board on the next evolutionary stage of the annuity, he added, centering on the asset management side of the story. “People are asking questions given that the 30-basis-point sleeve doesn't have any living benefits on it. Can we make this a more robust offering?” he said.