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Should I Be Concerned That A Hedge Fund Owns An Annuity Company?

Stan The Annuity Man

Question: Should I be concerned that a hedge fund owns an annuity company?  My local agent is recommending an annuity that is owned by a hedge fund, and he says that it’s a good thing.  What do you think?  from Peter in Salt Lake City, Utah

Answer: That’s a very good and extremely timely question Peter.  In the past 2 years, almost 30% of all indexed annuity carriers have been purchased by private equity firms and hedge funds.  That’s a pretty big market share in a very short amount of time, and has a lot of people in the annuity industry very concerned about the long term ramifications and the sincere intentions of these new owners.

For the record, I hope that these “master of the universe” hedge fund private equity annuity owners are in it for the long haul.  I hope that they understand that many retirees are placing their trust and hard earned money with them for the future contractual guarantees and benefits that influenced their decision.  I hope that these hedge funds don’t treat annuity assets like their typical investment assets, and just flip them for a profit in a few years.  Notice my trend of ‘hope”?  As an industry, we are hoping that this isn’t going to be a problem, because the ramifications could be devastating for the overall annuity category.

This year, I have written a couple of pieces in my weekly annuity column (click here) questioning if these new annuity owners are in it for the right reason.  Those articles have become the impetus for some state regulatory bodies to begin investigating these new hedge fund/private equity annuity owners.  The state of New York, along with the National Association of Insurance Commissioners, are formally looking into the matter.

As a consumer, you need to be aware of some common annuity agent sales pitches concerning this matter because many of the top selling indexed annuities are private equity/hedge fund owned.  Regardless of how good this new ownership sounds, their COMDEX scores (click here) are consistently around 50 out of a perfect 100 score.  FYI…that’s not good.

In addition to low carrier safety scores, a common trend is for private equity/hedge fund annuities to pay much higher commission to the agent as well as offering much higher guarantees that cannot be explained by most experienced actuaries that I have spoken to.  This obviously explains the increasing sales numbers, but certainly doesn’t justify these products being recommended at such a high rate from a client suitability standpoint.

I am currently in a “wait and see” mode until all of the dust clears, and until we can get a clearer picture on the long term intentions of these new owners.  My fingers are definitely crossed in the hope that they are in it for the long haul.  However, the last time the supposed “smart people” of Wall Street got involved in a traditionally boring industry….things didn’t turn out to well.  You may remember that debacle.  That boring industry was call MORTGAGES.  Remember that mess?

Let’s hope that same type of financial disaster isn’t being replicated once again….accept this time with annuities.  Be careful out there, and always remember, if it sounds too good to be true…it is.

*If you have a question for Stan The Annuity Man, please send your question to  He will answer all questions directly, and might include yours in his next Annuity123 “Ask Stan The Annuity Man” blog.

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About the Author:

Stan The Annuity Man is a nationally recognized annuity expert and annuity critic, and has been called the national consumer advocate for annuities… and a walking middle finger of annuity truth.  He is a weekly RetireMentor columnist for The Wall Street Journal’s, and is the exclusive annuity contributor for  His highly acclaimed book, The Annuity Stanifesto, is a top seller in its category, and is known as the go to resource for all things annuity.

Stan The Annuity Man has clients nationwide, and is considered one of the top independent annuity agents in the country.  You can learn more at


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