Risk-controlled factor rotator strategy developed by firm’s in-house Investment Team
Security Benefit announced the addition of two new index accounts based on the S&P 500 Factor Rotator Daily RC2 7% Index (Factor Rotator) and the S&P Multi-Asset Risk Control (MARC) 5% Index. Both diversified indexes are now options in new purchases of the firm’s Strategic Growth Series annuities, which offer contract-holders the potential ability to safely accumulate retirement assets without the risk of market loss.
“There is a broad and a deep series of academic and empirical research supporting positive risk premia being earned by equity investors’ exposures to securities with specific characteristics, or factors”
The new index options will also be available to existing contract owners of Strategic Growth Annuity, and Strategic Growth Plus Annuity, on contract anniversaries with an index term date beginning on or after March 29, 2021.
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“Our Strategic Growth Series fixed index annuities were met with tremendous reception in the IMO market when we introduced them in 2019,” said Doug Wolff, president of Security Benefit Life Insurance Company. “These new index accounts give financial professionals and their clients more dynamic crediting options to help diversify portfolios and reach retirement savings goals.”
The new S&P 500® Factor Rotator Daily RC2 7% Index was developed in-house by the Security Benefit Investment Team. It is owned by S&P Dow Jones Indices LLC and calculated daily by S&P.
“There is a broad and a deep series of academic and empirical research supporting positive risk premia being earned by equity investors’ exposures to securities with specific characteristics, or factors,” noted Joe Wittrock, Chief Investment Officer for Security Benefit. “We leveraged this research and the institutionalization of factor indices to create a crediting approach that recognizes the cyclicality of factor returns by delivering a simple, transparent index that rotates exposures amongst 5 well known factors (Quality, Value, Momentum, Low Volatility, High Dividend) and delivers that to our annuity policyowners by targeting a 7% annualized level of volatility. We are excited that Factor Rotator is now an option for Security Benefit contract holders.”
Every month, the weighted-return S&P 500® Factor Rotator Index seeks to track the two best performing factors based on past risk-adjusted returns. Dynamic rebalancing allows for a pivot in the future as factor leadership changes. In seeking to maintain volatility at 7%, the index varies allocations between the equity factor components, the Treasury Note Futures Index, and cash, depending on market performance on a daily basis.
“A fixed index annuity (FIA), like the two in our Strategic Growth Series, offers the best features of a traditional fixed annuity — a guarantee of the purchase payment and tax deferral — combined with the opportunity to increase the value of retirement savings,” added Wolff. “Using an index as an interest crediting option, an FIA has the potential to credit interest when the index goes up. But if it goes down, the principal and previously credited interest are locked in, unlike other savings vehicles.”
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In addition to the new Factor Rotator Index, Security Benefit added the S&P MARC 5% Index as another multi-asset diversification option in the Strategic Growth Series. The S&P MARC 5% Index, developed by S&P Dow Jones Indices LLC and calculated daily by S&P, is designed to track the performance of a risk-weighted portfolio consisting of three asset classes — equities, commodities, and fixed income — with a target volatility level of 5%. The three component indexes include the S&P 500 Excess Return Index, the S&P GSCI Gold Excess Return Index, and the S&P 10-Year U.S. Treasury Note Futures Excess Return Index. Should one or more of the markets experience a downturn, the index systematically re-balances to the less volatile asset classes. If all asset classes are volatile, the index risk control seeks to reduce market exposure and increase the allocation to interest free cash.
For daily valuations and more information about the S&P 500 Factor Rotator Daily RC2 7% Index, or the S&P Multi-Asset Risk Control (MARC) 5% Index, visit SPIndices.com and enter either the Index ticker symbol SPXFRRET or SPMARC5P in the search field.
