Better than Expected: The Hidden Dynamic of Variable Annuity Funds

Massimo Massa and Vijay Yadav

Review of Finance, 2016, vol. 20, issue 6, 2273-2320

Abstract: We study how variable annuity affiliation affects fund performance. We find that VA-affiliated funds outperform pure open-end funds by about 70 basis points four-factor alpha per year in case of actively managed US equity funds. We argue that affiliation with a variable annuity wrapper increases the ability of investors to compare performance of funds offered within the same wrapper. This increases the competitive pressure among fund families. We explain the superior performance of VA-affiliated funds in terms of self-selection: only the better funds are chosen by fund families to be part of insurance wrappers.

JEL-codes: G20 G22 G23 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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