How do Life Insurance Policy Funds Compare to the Performance of Mutual Funds?

Numerous studies have measured the investment performance of mutual funds, but far fewer studies have assessed the performance of other institutional investors, such as the separate accounts of life insurance companies. However, one study examined the attractiveness of the stock portfolios of life insurance companies as an alternative investment to mutual funds. Using testing methods similar to those used to evaluate mutual funds, the study concluded that on the basis of risk-adjusted investment performance alone, both life insurance and mutual fund portfolios yield similar returns. However, as life insurance contracts offer the opportunity for individual investors to defer taxes, these investment vehicles offer an edge over mutual funds when investors consider after-tax investment performance.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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