Submitted by Anonymous on
It's worthwhile to note that the only investment option available to owners of the Riversource RAVA 5 variable annuity (IF the owner has chosen to include an optional living benefit rider) is the Columbia-VP Managed Volatility fund.
In other words, if you select an optional living benefit feature with this VA, 100 percent of your assets must be invested in the managed volatility fund.
What, then, is the Columbia managed volatility fund?
While it's not entirely clear, the Riversource video on the fund describes a sort of constant reallocation of assets among equities and fixed income.
When "market volatility is expected to rise" (who has the market volatility crystal ball?), assets are shifted from equities to fixed income. When "market volatility is expected to fall", assets are shifted from fixed income to equities.
What is the proxy for market volatilty and why the assumption about a directly inverse correlation between volatility and equity returns?
How well has this fund performed? Since its inception (4/19/2012), a total return of 2.80 percent and a gross expense ratio of 1.02 percent. So 1.78 percent net since inception in April of 2012? Ouch. S&P is up 3.34 percent since April 2012.
Managed volatility seems good for the issuing company but maybe not so good for the VA owner?
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