Bernanke invests large sum in variable annuity

[saluki9]

I though this would be a fun one to throw around.

Fed chairman Ben Bernanke's net worth up sharply last year, his largest holding appears to be a VA.

Bernanke's Portfolio Rebounded in '09 - WSJ.com

 

[ziggy29]

Well, unless someone panicked and dumped their equities early in the year, I'd *hope* someone's portfolio rebounded in 2009...

 

[FIREd]

As the Fed chaiman, is he subjected to restrictions regarding how he invests his money? Since most variable annuities are like investment black boxes, they have a "blind trust" quality to them.

 

[saluki9]

As the Fed chaiman, is he subjected to restrictions regarding how he invests his money? Since most variable annuities are like investment black boxes, they have a "blind trust" quality to them.

1. He is only prohibited from owning individual stocks and financial oriented mutual funds

2. VAs aren't like black boxes, you choose the funds they invest in

3. VAs have almost nothing in common with a blind trust


BTW: I didn't post to argue to value of VAs, I just find it interesting

 

[FIREd]

I've owned VAs before. The VA was invested in some esoteric subaccounts which couldn't be researched independently. Black boxes with a generic label (large caps, bonds, small caps, etc..). Maybe (hopefully) Bernanke didn't get his VA from Ameriprise though.

 

[Sarah in SC]

Very interesting...have to share that around the office. Wonder what compelled him to choose the VA?

 

[ziggy29]

Very interesting...have to share that around the office. Wonder what compelled him to choose the VA?

In some jurisdictions VAs and other annuities have protections from lawsuits and creditors that regular brokerage/investment accounts don't. So maybe he was protecting his money against a class action suit from savers getting squeezed by Fed monetary policy....

 

[saluki9]

Very interesting...have to share that around the office. Wonder what compelled him to choose the VA?

I can think of a couple reasons. The asset protection reasoning is interesting and valid in many states. The other reason is that in the 2006-2008 insurers were offering insane promises and grossly underpricing them within VAs.

I remember talking to another forum member about this as I almost purchased one. One insurer in particular would essentially guarantee 7% annual returns even if you cherry picked the asset class (like EM or international SC). While it is true that you couldn't cash out the terminal value, you could essentially buy yourself a pension benefit that would grow at 7% as the worst case scenario. Was it expensive? Hell yes, but what did it matter when the 7% floor was net of expenses?

 

[haha]

While it is true that you couldn't cash out the terminal value, you could essentially buy yourself a pension benefit that would grow at 7% as the worst case scenario. Was it expensive? Hell yes, but what did it matter when the 7% floor was net of expenses?

The customer wins, the salesman wins, and the actuary gets fired.

Ha

 

[saluki9]

The customer wins, the salesman wins, and the actuary gets fired.

Ha

I think that's what happened

Should it be a surprise that the company who offered that contract is no longer offering new variable annuities for sale? For the people who did buy them they appear to be financially quite healthy (after a substantial government bailout from their home country's government)

 

[rmark]

If it's through a 403b plan common to universities, then a variable annuity may be all that is available in that asset class.

 

[dgoldenz]

I'll bet he lives in Florida.

 

[Nords]

Should it be a surprise that the company who offered that contract is no longer offering new variable annuities for sale? For the people who did buy them they appear to be financially quite healthy (after a substantial government bailout from their home country's government)

As you say, it's a surprise that they're still in business...