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Portfolio > Alternative Investments

Jefferson National Adds Alternative Investment Offerings

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Flat-fee variable annuity provider Jefferson National announced Monday that recent additions to its sub-account portfolio means it has more than 65 tax-deferred funds in the alternative investment category, which it claims is the most of any variable annuity currently offered.

The company now offers BFP Capital Management and W.E. Donoghue, the only variable annuity platform to do so, and Hatteras Funds will be offered beginning June 15. It also added new funds from existing partners: Invesco, Legg Mason, Janus, Fidelity Investments and Wilshire Funds Management.

“We’ve done studies that show tax deferral can add as much as 100 basis points of performance annually,” Laurence Greenberg, president of Jefferson National, told AdvisorOne. “Now, tax deferral had been largely dismissed by advisors because the focus was really on annuity riders and guaranteed products. Those cost money, which cancelled out the benefits of tax deferral. But now we can add the tax deferral piece back in with alternatives, and that’s a huge benefit.”

Greenberg said that when the company focused on the asset classes that needed tax deferral, alternative investments were a natural addition to the portfolio.

“We also have relationships with almost 1,700 RIAs across the country that are using Jefferson National’s Monument Advisor. They kept asking for more offerings in the alternative space. We heard them and acted to fulfill that demand.” 

He noted the company’s recent panel at the NAPFA National Conference in Chicago, “Alternatives, Next Generation ETFs and the Tax-Efficient Frontier: New Tools for the New Normal,” in which tax inefficiency as a barrier to entry with advisors and alternatives was discussed.

“Our latest addition of alternative strategy investment options goes right to this point,” Greenberg said.  

“The two big positives for us is the diversification aspect and the fact that you have some semblance of risk control,” adds David D’Amico, president of Braver Wealth Management in Needham, Mass. “The big negative was the tax inefficiency. If you take that away you have the added performance, which compounds annually. It also becomes more of an absolute return strategy, where you avoid some of the big loss years. Those two together can really add up to something.”

The new funds add to a lineup of 380 tax-deferred funds across a range of 59 Morningstar categories. Jefferson National’s Monument Advisor is now used by 1,650 RIAs and fee-based advisors nationwide.

Jefferson National is not the only annuity provider to trumpet its alternative investment offerings of late. In early March, Jackson National Life announced it, too, is bringing alternative investments to the masses. The company, based in Lansing, Mich., launched Elite Access, an investment vehicle designed to provide greater portfolio diversification through the use of alternative asset classes. Elite Access combines three core elements—alternative investments, risk management and tactical management—to address market volatility and the potential for higher returns with less risk.

“Coming out of the economic crisis, advisors and clients were rightly asking if there was a better way [to minimize risk and achieve returns],” Clifford Jack, head of retail for Jackson, said at the time. “Pensions and endowments seemed to get it right, so advisors were looking to replicate what they did in order to reduce volatility and increase performance. As a result, they are more likely to consider counter-correlation products that decrease risk; something other than simply traditional stocks and bonds.”

According to the company, Elite Access features “a wide range of investment options and philosophies, all optimized through the benefits of tax deferral.”

Individual investment options fro mJackson National include:

  • Alternative investments: Twelve options, including managed futures, commodities, listed private equity, global infrastructure, convertible arbitrage and emerging-market debt that provide enhanced diversification potential;
  • Traditional investments: Options from well-known, reputable active managers such as American Funds, Franklin Templeton, JPMorgan and T. Rowe Price that span across investment styles.


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