Investing Trend’s Assets Hit $129B

Managed volatility investment strategies are emerging as a solution for investors looking to protect against future stock market losses, Strategic Insight’s research found.

“Managed Volatility: The Anatomy of an Investing Trend” analyzes the mutual funds that use this innovative investment style. The research report is from Strategic Insight, an Asset International company. The strategy seeks to outperform the broad stock market by reducing total risk.

In less than a decade, managed volatility assets have accelerated to $129 billion as of September 2012. With so much new fund activity and asset accumulation, the funds have piqued interest among asset managers, insurance companies and distributors.

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The analysis reveals that a substantial amount of growth comes from funds converting to managed volatility mandates. At the end of September, $61 billion, or 47% of the total assets in managed volatility funds, came from converted portfolios. Most of this activity has been in the variable annuity space, which also commands the bulk of assets.

The managed volatility trend has taken off since the financial crisis in 2008, according to Tamiko Toland, managing director of retirement income solutions at Strategic Insight. “These funds include a dynamic element that readjusts the investments for periods of high volatility or market declines,” Toland said. “This kind of strategy is directly useful to clients but is also valuable for insurance companies providing guarantees against assets held in variable annuities.”

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Because managed volatility funds can help insurers better manage the risk of living and death benefits, the funds have proliferated within variable annuity funds. However, managed volatility funds are also gaining steam among retail mutual funds. Managed volatility mutual fund assets have grown substantially, from $967 million in the first quarter of 2006, to $21 billion at the end of the third quarter of 2012.

While 84% of today’s managed volatility assets are held within variable annuities, this investment category is clearly gaining a foothold among retail mutual funds and is likely to grow in other areas, including college savings and retirement plans.

Strategic Insight’s research has identified 175 funds from 32 advisers. With so many players, there are a wide variety of approaches, all classified and identified within the report. “The report is the first of its kind to quantify the managed volatility opportunity and analyze the biggest players,” Toland said. “We’ve also seen a lot of interest from mutual fund boards for analysis on this trend.”

More information on the report, including the table of Contents and a fact sheet, is available here.

Mesirow Launches Model Portfolios on MATC Platform

Mesirow Financial rolled out a series of model portfolios on the Mid Atlantic Trust Company (MATC) ModelxChange platform.

The portfolios’ exposure to exchange-traded funds (ETFs) and mutual fund investment options allows advisers and plan sponsors the flexibility to offer strategies that are based on mutual funds, passive ETFs or both active and passive ETFs. The portfolio sets will include both target-date and risk-based options.

Mesirow Financial designed the portfolio suite for both fee-based and commission-based advisers, and offers three levels of 12b-1 payouts. By using the ModelxChange platform, Mesirow Financial will be able to take advantage of the technology to provide more efficient 3(38) investment manager fiduciary services to plan sponsors.

“This step is part of our continuous effort to expand the audience for our flexible and cost-efficient fiduciary solutions,” said Michael Annin, senior managing director and head of Mesirow’s investment strategies team.

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