What Kinds of Investment Funds are Offered Inside Variable Life Insurance Policies?

For the more aggressive or knowledgeable investor, some companies now offer GNMA funds, real estate funds, and zero coupon bond funds. Some specialized funds such as small capitalization stock funds, market index funds, and funds that focus on specific sectors of the economy or industries (i.e., medical, high tech, gold, leisure, and utilities) are also available. In recent years, Exchange-Traded Funds (ETFs) based on broad stock indexes and others ETFs based on industry sectors, and even less-broadly-diversify portfolios have become popular with investors.

Some companies offer a managed fund option where the company’s investment manager assumes the responsibility for apportioning investments among the various alternative funds. Some VL policies also offer a guaranteed interest option similar to the declared interest rate on universal life policies. Recently, some insurance companies have offered investments in hedge funds for policyowners who meet certain income and net worth requirements. Hedge funds are investment companies that are generally unregulated by the SEC; hedge funds may use high risk techniques, such as borrowing and short selling, to make higher returns for their investors.

One of the more popular trends in recent years has been the target age funds that are portfolios designed and managed to have asset allocations appropriate to various investment horizons ranging from five to thirty, or more, years.

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

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