Fidelity to Launch Mutual Fund Based on Hedge Fund Strategy
(Oct 2013)
We see it again and again: complex investment strategies packaged into traditionally conservative investments. We have seen corporate debt linked to exotic derivatives positions (structured products), exchange-traded products linked tocomplex futures positions (commodities and volatility ETPs), variable annuities linked to options strategies (structured product based variable annuities), and even certificates of deposit with complex payoff structures (structured CDs). Now, we are seeing more...
IBM Switches to Annual 401(k) Contributions
(Dec 2012)
The Associated Press recently posted a story concerning IBM's effort to cut costs by switching from regular contributions to employees' 401(k) accounts on each paycheck to a lump-sum contribution at the end of each year. This move, clearly in the best interest of shareholders, has real and significant implications to the 401(k) accounts of IBM employees. According to the article, only a minority of companies use this type of arrangement.
About 7 percent of employers offering 401(k)s make...
Problems Surrounding the Complexity of Annuity Products
(Mar 2012)
On Sunday, The Wall Street Journal reported the felony-theft conviction of Glenn Neasham who had sold a complex annuity to an elderly woman. The conviction -- which comes with a 90-day sentence -- was handed down by a state-court jury in Lake County, CA. From the article:
The case underlines authorities' continuing discomfort with "indexed" annuities, savings products that pay interest tied to the performance of stock- and bond-market indexes. Insurers guarantee that buyers won't lose any of...
In the News: Structured CDs
(Feb 2012)
Bloomberg News reported this week that FINRA is investigating a relatively new type of product that ties the returns of certificates of deposit (CDs) to derivatives. These products are known generally as 'Structured CDs' (SCDs) but also go by 'Index-Linked CDs', 'Equity-Linked CDs' or 'Market-Linked CDs'. There have also been news stories concerning Market-Linked CDs issued by Wells-Fargo and Equity-Linked CDs issued by Goldman Sachs in recent years.
SCDs have existed since the late 1980s,...
In the News: Equity-Indexed Annuities
(Aug 2010)
An annuity makes periodic payments to the holder of the annuity. Fixed annuities make fixed payments and variable annuities make variable payments. Equity-indexed annuities (EIAs) are similar to both fixed and variable annuities in that they pay an interest rate linked to an equity index and guarantee a minimum interest rate. EIAs are especially marketed to retirees by the insurance industry.
Forbes published an article on EIAs. The article evaluates the claims made by typical marketers...
In the News: Equity Indexed Annuities
(May 2010)
Forbes published an article on equity-indexed annuities (EIAs). It describes the history of and market for EIAs, compares EIAs with other fixed and variable annuities, and briefly weighs the advantages and disadvantages of EIAs.
An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments. EIAs are similar to both fixed and variable annuities in that they pay an interest rate linked...
