Multi-Asset Risk-Controlled Index Available with the DYNAMARC INDEX® ANNUITY
DYNAMARC INDEX ANNUITY features several account options which offer index-linked crediting covering a variety of strategies. Each strategy is designed to benefit from index gains, while providing protection during index declines.
Two of the crediting strategies for DYNAMARC INDEX ANNUITY are based on the Goldman Sachs Dynamo Strategy Index – a “multi-asset index” which allocates among several asset classes (equity, fixed income, commodity, real estate and cash) and features a “risk-control” element. The two DYNAMARC INDEX ANNUITY crediting strategies which feature this index are:
- 1-Year Point-to-Point Participation Index Account
- 2-Year Point-to-Point Participation Index Account
Performance with Less Volatility
The Goldman Sachs Dynamo Strategy Index (the “Index”) is a multi-asset index customized exclusively for EquiTrust Life Insurance Company. Your premium is not invested directly in the Index or underlying components; rather, index credits are linked to returns of the Index. The goal of the Index is to deliver the highest risk-adjusted returns subject to a target volatility by combining Modern Portfolio Theory and principles of Momentum-Based Investing.
- Modern Portfolio Theory: seeks to maximize returns for a given level of risk by systematically allocating across a diverse set of asset classes.
- Momentum-Based Investing: attempts to allocate more to past outperformers and less to past underperformers.
The Process: Multi-Asset Reallocation with Controlled Risk
The Index uses historical returns and volatilities to determine the allocation across the underlying components on a monthly basis. The index can also allocate to a cash component to help reduce the volatility. The index is designed to deliver:
The Index selects from a portfolio of eight domestic and international components across five asset classes: equities, fixed income, commodities, real estate and cash. Diversification across asset classes and geographic locations may lead to more stable returns over time. A portfolio comprised of a variety of assets has the potential to yield more favorable risk-adjusted returns.
On a monthly basis, the Index dynamically rebalances the weightings of the underlying components. The Index uses past data to identify the portfolio that would have had the highest six-month return, given the targeted level of volatility and subject to certain weight constraints. By using historical data to select the portfolio for the coming month, the Index captures momentum in the market. Generally, this will result in allocating more to recent outperformers and less to recent underperformers.
The Index uses a volatility-control feature to help generate stable, smooth returns over time. The index has a “volatility target” of 5%, which is used to determine the asset allocation on monthly rebalance dates. The monthly portfolio is constructed to have the highest six-month historical return with a realized volatility no higher than 5%. The Index also has a “volatility cap” of 5.5%, which is used to systematically monitor the volatility on a
daily basis. If the one-month realized volatility of the monthly rebalancing portfolio exceeds the volatility cap on any day, the Index will increase the cash position to reduce volatility. The volatility control feature can help reduce the magnitude of both upward and downward swings in the Index.
When you select the Goldman Sachs Dynamo Strategy Index within your DYNAMARC INDEX ANNUITY, you gain access to a dynamic, multi-asset risk-controlled strategy – within a custom index. You benefit from asset-class diversification, systematic rebalancing and volatility-control features that were historically available only to institutions.
For more information about the Goldman Sachs Dynamo Strategy Index and current Index allocations,
please call DFS Marketing at 855-740-3140