Products October 8, 2007

Mesirow Financial Latest to Launch Target-Date Solution

Chicago-based Mesirow Financial Investment Strategies has unveiled its new target maturity methodology, focusing on both longevity risk and asset allocation.
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According to a press release, the white paper, “On the Optimal Design of Target Maturity Portfolios,” authored by Janis Zvingelis, Ph.D., asserts that the main risk facing long-term investors is not the short-term variation in asset returns but rather longevity risk, especially in light of increasing life expectancies. “We believe that most target maturity offerings currently on the market are under-serving their investors by failing to address longevity risk,’ says Michael Annin, CFA, managing director of Mesirow Financial Investment Strategies. “The fact is that most investors will outlive their retirement savings given the current savings rates and the design of current target maturity products.

Longevity Risk

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The firm contends that the usual approach to constructing an equity “glide-path’ – the asset allocation backbone of the portfolio – “can be somewhat arbitrary and rarely addresses the longevity risk issue.’ In contrast, Mesirow Financial says the methodology underlying its new offering “…has a solid basis driven by the concept of time-varying inputs (expected returns, standard deviations, and correlations).’ Time-varying risk of equity, one of the main drivers of the simulation results, is a consequence of “time diversification’, according to the firm – a phenomenon whereby the risk of investing in equity decreases dramatically with the investment horizon, while the risk of cash increases considerably with the investment horizon.

“The use of time-varying inputs results in a generous allocation to equity in the portfolios that drive the performance results,’ according to the firm. Moreover, in contrast with the arguments put forth in support of a different approach, Mesirow claims that “the implied standard deviations and the simulation results demonstrate that for long horizon investors the increased equity allocations do not lead to excessive portfolio risk.’

The study also showed that even slight changes in investors’ saving and income withdrawal behavior can have dramatic impact on their cumulative wealth outcomes.

Mesirow Financial is a diversified financial services firm headquartered in Chicago, and founded in 1937. More information about the firm is available at http://www.mesirowfinancial.com

Products October 8, 2007

AIG VALIC Broadens SRI Offering

AIG VALIC, an investment provider focusing on the non-profit and for-profit education, health care, and government markets, has broadened the investment mandate of the VALIC Company I Social Awareness Fund.
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A news release said the new mandate for the Portfolio Director fixed and variable annuity would include socially responsible equity opportunities around the world.

According to the company, the newly named Global Social Awareness Fund provides clients with the opportunity to align their investment decisions with personal values and beliefs. It is one of four socially responsible funds VALIC offers in its variable annuity products.

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VALIC’s newly expanded global fund will invest in the stocks of primarily large capitalization companies located in developed markets worldwide that meet social criteria established by the fund, according to the company.

This means screening out investment in companies that substantially engage in the manufacture or marketing of alcohol, tobacco, gambling, civilian firearms, military weapons or nuclear power. It will also avoid companies that have poor records concerning employee safety, environmental performance and labor relations, the company said.

The fund’s primary investment goal is long-term capital appreciation. Its performance benchmark is the Morgan Stanley Capital International (MSCI) World Index.The Global Social Awareness Fund, as well as its domestic counterpart, the Socially Responsible Fund, are subadvised by AIG Investments.

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