Research from Dr. Wade Pfau highlights ForeStructured Growth II (RILA) using the Dual Directional Yield Crediting Strategies as a fixed income allocation alternative for retirement portfolios.
Executive Summary
Registered Index-Linked Annuities (RILAs) offer a valuable tool for providing an element of risk management with certain investors. By linking interest crediting to a market index while providing an element of downside protection through the use of a buffer or floor when held through the Strategy Term, RILAs can improve risk-return tradeoffs.
This whitepaper analyzes Dual Directional Yield Crediting Strategies. They’re unique strategies available for six-year Strategy Terms in the ForeStructured Growth II (RILA). These Strategies stand out with:
- Strong & Stable Growth Potential: Historical analysis suggests Dual Directional Yield Strategies can deliver higher average returns than traditional bonds with lower volatility and a reduced risk of loss. For example, the 20% buffer Strategy would have had an average cumulative crediting rate of 36.6% for the period examined.
- Element of Downside Protection: These Strategies incorporate a buffer that absorbs initial index losses if held through the end of the Strategy Term, providing valuable protection against market downturns. The 20% buffer would have provided 100% protection from losses to the credited interest from Performance Credits for the period examined.
- Yield Potential: Quarterly Performance Credits are generated when the index meets specific performance thresholds (Performance Trigger).