LSA will be making revisions to all variable annuity platforms over the next two weeks. We will be releasing the revisions in three waves. The first wave has already been posted and will include: (Private Client Tax Efficient, JNL, JNL Elite Access, Jefferson National, Sammons, Voya Select Advantage). The revision allocation sheets have already been posted to the website and we will be posting the revision explanations and videos over the weekend with a targeted trade date of March 6th. Below, please find the next two waves of model changes to be released.
Investment Rationale: LSA will be recommending changes to all the VA model portfolios over the next two weeks to address some under-performing sub-accounts that have been placed on a watch-list and to continue with our movement of reducing risk or correlations in the portfolios. As market highs continue to be reached LSA would like to take the opportunity to realize some gains, reduce risk and square up the model portfolios. The IPC will be recommending funds in the models with the attempt to reduce risk and to provide solid downside protection. Although the IPC continues to believe that a recession is not eminent in 2017, we do believe that the probability of a recession in the next couple of years has increased greatly over the last eight months. The March 2017 model changes are not targeting big shifts in asset class exposures. We believe the portfolios handled well in 2016, but we will continue to explore the use of alternatives. The alternatives will be used to reduce correlations, the potential for emerging market equities to go after attractive valuations, and commodities as ways to combat inflation.
The high level thesis is that in 2018 the US economy will be faced with a couple of difficult headwinds that have greatly increased the probability of a recession taking place. These headwinds are not limited to, but include, the idea that the Fed rate hikes that started in December of 2015 will be thirty plus months in play at that time. Historically, recessions will occur thirty to forty months after the Fed begins to raise rates. The markets will also be facing the first major reset of bonds purchased by the Fed in the numerous QE programs. We have already begun to see a slowdown in corporate earnings, and when you couple that with slow economic growth in the developed world, it creates a case for difficult markets ahead. The IPC will be looking to slowly reduce risk from the portfolios over the course of the next two years. We believe such model changes could be particularly helpful during conditions of weakness for equities and/or other equity-correlated risk assets.
*As a reminder, the Revision Explanation Presentation/Video will be posted in the “News & Announcements,” section on the LSA Beta home page over the weekend.
** TRADE DATE SCHEDULED FOR – March 6th, 2017 – Revision sheets are currently posted online:
- Private Client Tax Efficient (including NTF models)
- Jackson National
- Jackson National Elite Access
- Jefferson National
- Voya Select Advantage
** TRADE DATE SCHEDULED FOR – March 9th, 2017-Content to be posted on March 3rd
- Ohio National
- Security Benefit
- Voya VA
- Voya VUL
** TRADE DATE SCHEDULED FOR – March 15th, 2017-Content to be posted on March 8th.
- Pacific Life
- Protective Life
LSA will be addressing the dropbox allocations for the Variable Annuities with rider restrictions the week of March 20th .
If you have any questions please feel free to contact us at support@LSAportfolios.com or call us at 866-581-5724.