Earlier this year, actuarial company Milliman discontinued more than two dozen buffered funds, due in part to difficulties with the traditional variable annuity market. RetireOne CEO and co-founder David Stone explains that this decision is likely the result of issues with scale.
“It’s hard to see a pathway to growth for a Milliman… [it isn’t] a BlackRock or a
Vanguard. Outside of the insurance world it’s not known… Without a wholesale team out there, they will suffer… You need a certain amount of scale to be profitable and when the flows are not there and you have redemptions going on, that’s difficult.”
Milliman’s decision to shutter these funds doesn’t appear to be indicative of a larger trend. Insurance carriers like Lincoln National and Principal Financial will continue to offer buffered funds. According to Phillip Nicolino of Principal Financial:
“We have no plans to stop offering the Principal Variable Contracts U.S. LargeCap Buffer Series that provide opportunities for both market growth and limited downside protection.”