Normally, variable annuities sold through insurance companies employ mutual funds.
But next week, what’s believed to be the first ETF-based variable annuity is set to hit the market, according to Daisy Maxey of Dow Jones Newswires.
The Variable Annuity for Roll Over Only Money, or Varoom, is being designed to let investors build a customized portfolio of subaccounts that invest directly in ETFs.
Varoom was created by the Integrity Life Insurance and National Integrity Life Insurance. Both are part of Cincinnati-based Western & Southern Financial Group.
The variable annuities will have 18 different ETFs from Vanguard and BlackRock’s (BLK) iShares unit.
“The fact that the subaccounts are investing directly in ETFs is unique,” Frank O’Connor, a Morningstar analyst, says. “Heretofore, we’ve only seen contract structures where ETFs are the underlying investment of a fund of funds.”
An example of such a fund-of-funds approach is Lincoln Financial Group’s (LNC) SSgA Global Tactical Allocation Fund, the report notes.
