Insurance management platform provider DPL Financial Partners is working with Eduardo Repetto and Patrick Keating of investment manager Avantis Investors to launch a new U.S. equity index, in partnership with Barclays, which is designed to deliver higher expected returns at lower volatility, according to an announcement. Called the Avantis Barclays Volatility Control Index, the index is meant to facilitate the manufacture of fixed index annuity investments specifically for registered investment advisors and their clients.
The index is a first for Repetto, chief investment officer at Avantis and former co-CEO of Dimensional Fund Advisors (DFA), according to the announcement. An index account option based on the Avantis Barclays Volatility Control Index is already available exclusively in Security Benefit Life’s ClearLine Annuity on DPL’s platform. The index is centered upon an excess return option strategy—therefore offering the benefit of dividends—rather than a price return.
Repetto’s leadership on the index design has been a game changer, said David Lau, CEO and founder of DPL. “We’ve got Eduardo Repetto and Avantis building this index,” he said. “Eduardo [Repetto]’s participation in this brings a lot of credibility.” Lau noted that DPL is expecting to continue building indexes, which it hopes will help eliminate some of the cost within associated products.
While Repetto is widely associated with ETFs and other funds, he’s turning his attention to annuities as advisors consider replacing fixed income investments with annuities. “When I learned about the fixed index annuity structure, I thought it presented a great opportunity to help advisors rethink asset allocations,” he said, in a statement. “[Fixed index annuities] offer risk mitigation, like fixed income, while diversifying the driver of returns away from bond yields. I think this structure can help advisors improve their clients’ portfolios, in particular during these times of extremely low bond yields.”
Repetto spent 17 years with DFA, including as co-CEO and co-chief investment officer, before leaving the firm in 2017. By 2019 Repetto and Keating were developing and launching a new set of funds with American Century Investments. The funds, noncommissionable products targeted at fee-based advisors, were designed to compete with DFA.
Even some advisors who currently don’t use fixed index annuities are giving the new index a second look, in part because of Repetto. “I’m always skeptical of anything that’s produced as a product, because then you have a lot of different hands in the pie that need to get paid,” said Timothy Koehl, principal at Bernhardt Wealth Management, a $534 million AUM firm based in McLean, Va. “Why does the SEC have a warning about indexed annuities? It’s pretty clear; they’re complicated.”
But after a client emailed Koehl an article about annuities, at the same time as DPL and Repetto announced the Avantis Barclays Volatility Control Index, Koehl is rethinking his approach to annuities. He needs more information to understand which of his clients might be a good fit for a fixed index annuity, but Repetto’s design expertise has alleviated some of Koehl’s concerns. “It reduced some of my skepticism to know that Eduardo [Repetto] was involved. I respect him as someone who is always trying to work in a client’s best interest,” said Koehl.
“We’re traditionalists,” he explained. “We believe in a diversified global portfolio of stocks and bonds and we’ve found that for most of our retired clients, a 60/40 mix [of equity and fixed income investments] has worked very well.”
But annuities specifically designed for RIAs, combined with client demand and concerns over interest rates and inflation, could be strong enough factors for Koehl to change his investment philosophy. “I really look forward to learning more about the index,” he said, “and seeing if it can fill a gap for some of my clients.”