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Portfolio > Portfolio Construction

Prudential, Jefferson National expand VA investment lineups

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Both Prudential Annuities and Jefferson National have expanded the investment options available to their variable annuity (VA) buyers.

For purchasers of Prudential variable annuities that elect the Highest Daily benefit option, the total number of asset allocation portfolios has risen from 19 to 21 and includes six new choices:

  • AST BlackRock iShares ETF Portfolio, which invests in iShares exchange traded funds (ETFs) across global equity and fixed-income asset classes.
  • AST Defensive Asset Allocation Portfolio, which is a portfolio designed for investors seeking to minimize their equity exposure.
  • AST Franklin Templeton Founding Funds Plus Portfolio, which is a broadly diversified portfolio that targets stocks and bonds that appear attractively valued.
  • AST Goldman Sachs Multi-Asset Portfolio, which provides access to traditionally underexposed “growth markets” regions.
  • AST Prudential Growth Allocation Portfolio is an actively managed portfolio that determines allocation and security selection through a quantitative model, as well as by a review by an asset allocation team.
  • RCM World Trends Portfolio takes advantage of investment opportunities and trends throughout the world by combining a quantitative model with fundamental research.

Douglas McIntosh, vice president of investment management for Prudential Annuities, tells that the new fund lineups were added to give financial planners more choices in addition to enabling Prudential to diversity among its fund managers. “If we don’t have a wide variety of underlying managers then we have one manager with a lot or maybe too much of our clients’ money,” he says. “We don’t want to expose our clients to single manager risk.”

Though he wouldn’t characterize any of the fund choices as particularly risky, McIntosh says they do represent a “fairly wide swath of risk tolerance.” For example, the AST Defensive Asset Allocation Portfolio includes a conservative mix of 15 percent equities and 85 percent fixed income. “There is a clamor for a conservative place to house equity-scared money,” McIntosh says.

Conversely, the Franklin Templeton option includes a “healthy” portion of non-U.S. fixed income investments. “Some investors whose time horizon and personal construction allows then to shoulder a bit more volatility may want the opportunities that small cap equities or non-U.S. fixed income are going to give to them,” McIntosh says. “For others, it’s not for them. There are options for all.”

Meanwhile, Jefferson National has teamed with Envestnet to add 14 new institutional-grade model portfolios to its Monument Advisor variable annuities. The new Envestnet/PMC models span the risk tolerance spectrum from capital preservation through aggressive, according to a company statement.

Brandon Thomas, chief investment officer for Envestnet, said in a release that the aim of the partnerships is to help advisors “manage risk, hedge against volatility and improve after-tax returns for their clients.” This is the first time Envestnet/ PMC’s models have been made available in a tax-deferred VA, according to the company.

Prudential’s McIntosh agrees that the overarching trend in the annuity insurer space today is to mitigate risk and dampen volatility, which is the driving force behind many of the switch-ups in VA investment options of late. In that regard, he sees a trend toward the use of volatility managed funds (something Prudential has not done, he notes) as well as push to limit choice and reduce the aggressiveness of fund options. He is also seeing investors gravitate to VAs not so much for their lifetime benefits but for their tax-advantaged status.

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