Diversification and tax-deferred investing are taking center stage in annuity product offerings these days, and Jackson National Life Insurance is following the trend with an investment tool designed to diversify portfolios with alternative asset classes.
Elite Access, the new product, is actually a collection of investment options that combine alternative funds, risk management and tactical management strategies to offer investors the potential for higher returns and offset market volatility in clients’ portfolios.
Jackson National designed the product to help financial advisors properly allocate portfolios adjusting for risk, particularly now that volatility in the equity markets has followed the 2008 financial market meltdown, said Clifford Jack, head of retail for Jackson National.
“Volatility is high on a relative basis, and interest rates low on a relative basis,” Jack said. “Clients were burned in a way that advisors could not have anticipated.”
Elite Access features 12 alternative investment options, including managed futures, commodities, listed private equity, global infrastructure, convertible arbitrage and emerging markets. There is also a group of traditional investment options from established investment managers such as American Funds, Franklin Templeton, J.P. Morgan and T. Rowe Price, according to the company. Jackson National modeled the offerings after portfolios that are available to institution investors.
“We found that the institutions, pensions, endowments, generally performed better than retail clients when it came to how investments performed in the investment crisis,” Jack said.
Expert managers steer the portfolios, which is important for the underlying products in the portfolios, especially alternatives, Jack said. From 2000 through 2010, for instance, a portfolio made up of stocks, bonds and cash underperformed with more volatility than a portfolio with a 20% to 30% allocation to alternatives, Jack said.
“The delta between good and not-good managers in traditional investments is not that great,” he said. “We see huge discrepancies between the best and worst managers in alternatives. We absolutely believe in active management.”
Jackson National estimates that the all-in costs average about 225 basis points. Comparable products in the mutual fund wrap business, are around 265 basis points, including the advisor fee, according to Jack.
Donna Mitchell writes for Financial Planning.