Jefferson National Financial Corp. recently announced it expanded its variable annuity menu to include more than 65 tax-deferred alternative funds. The Louisville, Ky.-based company says the bolstered lineup on its Monument Advisor flat-fee variable annuity platform is the first and only one to offer alternative investment options from BFP Capital Management, W.E. Donoghue and Hatteras Funds.
The company also padded its available offerings from existing contributors to its platform such as Invesco, Legg Mason, Janus, Fidelity Investments and Wilshire Funds Management.
These funds are variable insurance trusts that are essentially mutual fund-like products within a tax-deferred wrapper.
Alternative investment strategies are very much tactical allocation strategies that can involve a range of options such as holding long or short positions on securities, as well as using derivatives or leverage. That can lead to heavy turnover, which creates fees and short-term capital gains.
According to Jefferson National, the beauty of putting such strategies into tax-deferred variable insurance trusts is that it helps mitigate the tax bite.
"For many advisors tax-inefficiency can be a big barrier to using alternatives," says Laurence Greenberg, Jefferson National's president, noting that these products can help create a tax-efficient way to improve the performance potential of alternative strategies that are seeing greater demand from financial advisors. "Our surveys show that nearly two-thirds of advisors think alternatives will become more important than traditional asset classes."
David D'Amico, president of Braver Capital Management in Needham, Mass., says his firm uses some of the ProFunds' lineup of tradable, actively-managed funds on Jefferson National's platform.
"Because the mutual fund lineup beneath the annuities are so broad, what with ProFunds and other funds, it gives us plenty of flexibility to manage our strategy," D'Amico says. "You can carve out a portion of a portfolio in alternative investments to add a lot of value to clients both from a risk management and tax deferral standpoint at a very low cost."