In contrast “variable annuity subaccount investors have exhibited a different behavior in terms of patience and have stayed in their investments for a year longer than the average equity mutual fund investor until 2019 where it dipped slightly below the one-year mark (0.95 years) before expanding back to a 1.04 year differential—4.55 years for equity subaccount investors vs. 3.51 years for equity mutual fund investors, “ Dalbar found.
The most dramatic difference between the behavior of mutual fund investors and a variable annuity subaccount investors is the way they move money among the different investments within their portfolios. And there too, the average subaccount investor displayed far more patience than the average mutual fund investor when examining the retention rates among the two investors, the firm found.
Annual returns “produce a clear pattern in which the Average Subaccount Investor had mixed results against the Average Mutual Fund Investor from 2000-2008, but has had a decided advantage over the Average Mutual Fund Investor ever since,” Dalbar said.
As a result, “the Average Subaccount Investor outperformed the Average Mutual Fund Investor on an annual basis over 1, 3, 5, 10, 15 and 20-year time periods,” the firm added.
The study, “Quantitative Analysis of Investor Behavior—Variable Annuities,” is based on average investor data Dalbar has been computing for the industry since 1994 as the basis of its comparison.
QAIB calculates investor returns as the change in assets, after excluding sales, redemptions, and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs to arrive at total return rate and annualized return rate.
DALBAR will be hosting a complimentary webinar on Wednesday, June 2 to summarize the study, provide details on the results and field questions.