Are Equity Indexed Annuities Really the Top Performing Asset Class Since 1995?

A recent article in Forbes magazine discusses the pros and cons of equity indexed annuities.

On the negative side the author makes a high level reference to costs and questions whether equity indexed annuity owners receive fair value for what they pay.

The interesting part of the article, though, is on the positive side.  The author mentions that since 1995, "these" annuities have easily outpaced the S&P 500 and bond indexes alike.  I assume that by "these" the author is referring specifically to equity indexed annuities.

The author then references a study by Professor David Babbel at The Wharton School.  A quote from Professor Babbel references the study:

"There is no asset category that outperformed them. We were extremely surprised, really just amazed," says David Babbel, professor emeritus of insurance and risk management, who conducted a study of equity-index annuity returns beginning in 1995.

I was actually unable to find the specific study or any other data that supports the above comment and quote.

That said, if equity indexed annuities are in fact the top performing asset class since 1995, then the industry should be relentlessly broadcasting this message.  Equity indexed annuities are constantly criticized in the press.  A top slot in the asset return category over a 15 year period pretty much trumps any criticism that the financial press might be able to drum-up.

There is likely an interesting case to be made for the 10-15 year returns of annuity products such as variable and equity indexed annuities that provide some hedged exposure to equity market returns.

There has been enormous capital market volatility since 1995: the Asian financial crisis and Long Term Capital in 1998; the dot-com implosion in 2000; September 11, and; the recent financial crisis. 

The ability to capture any returns that have occurred during that period while limiting the damage of the extreme downside events has likely been optimal investment strategy.

We'll keep digging for the actual data and certainly welcome feedback from anyone who might have supporting information.