MetLife Inc., another major provider, has been a proponent of embedding risk management within the investment options available to variable annuity clients. In May, the company launched four “protected growth strategies,” three of which are subadvised by a single manager each: AllianceBernstein's global dynamic allocation portfolio; AQR's global risk balanced portfolio and BlackRock's global tactical strategies portfolio. The fourth uses best-of-breed managers, with Pacific Investment Management Co. providing an overlay.
“We think having investors themselves manage the volatility is the next generation” in risk management for variable annuity programs, said Elizabeth M. Forget, senior vice president with MetLife, New York.
Tamiko Toland, a managing director with New York-based Strategic Insight and head of that firm's retirement income consulting practice, predicted that controlling risk at the level of the investment strategy options offered to policyholders, as the latest MetLife products do, could prove the stronger trend. Still, the two aren't mutually exclusive, she said.
Mr. Ferris agreed, noting that adding risk-based fund options for policyholders is complementary to the goals pursued by Prudential's asset transfer program. In May, Prudential added BlackRock's global strategies portfolio and Wellington's hedged equity portfolio to its lineup of variable annuity offerings.
At both ends of that spectrum, policyholders are giving up some degree of control over their investments in return for greater security. That move to “share risk” reflects “a shift in investor psyche, from more choice to more certainty,” noted Ms. Forget.
Industry veterans said there's no sign that demand for variable annuity products is being dented by the narrower scope policyholders are being given to control their investments.
For example, in the quarter ended June 30, MetLife reported $7 billion in variable annuity sales, up 55% from the year before. MetLife spokeswoman Holly Sheffer said the company doesn't break out the portion of those sales attributable to the products launched in May. However, one industry observer, who declined to be named, said BlackRock, AQR and AllianceBernstein appeared to pick up just more than $2 billion of that $7 billion total among them.