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An Alternative to Target Date Funds and VAs

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Structured Investment Management (SIM) Inc., has launched a new mutual fund, the S&P 500 Capital Appreciation Fund, that it says overcomes the poor performance of dynamic asset allocation strategies used by target date funds, many variable annuities, and certain principal-protected notes.

Besides offering tax and liquidity advantages as well, the fund provides upside exposure to the S&P 500 index, while providing protection and a positive return on the downside, according to Structured Investment Management, an investment advisory firm headquartered in New York.

According to SIM, the fund is passively managed to track the S&P 500 index on the upside but, on the downside, has derivatives contracts in place to ensure that its Net Asset Value (NAV) in 10 years will be at least 150% of its initial NAV less certain fees, expenses and costs. In the case of the Class A shares, this should result in a minimum NAV that is approximately 119.4% of initial NAV, the company says. SIM says it designed the fund and is its investment advisor, but the fund is administered by U.S. Bancorp Fund Services.

Ramesh Menon, founder and president of SIM, said in a statement that target date funds, certain variable annuities, and certain principal-protected notes rely on a dynamic strategy combining stocks and bonds that has invariably proved disappointing to investors. “Critically, our fund will always be entirely invested in the S&P 500 index,” Menon said.


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