Defined terms for the annuity market and lifetime income landscape.
A variable annuity is an insurance contract under which the contract owner allocates premium to subaccounts holding investments whose values fluctuate with market performance, with optional living-benefit and death-benefit riders providing contractual guarantees in exchange for explicit charges.
Volatility drag is the structural cost that variation in period-to-period returns imposes on long-run compounded growth — the gap by which an investor's realized compounded return falls short of the simple arithmetic average of the period returns, with the gap growing as the variation grows.
A volatility-controlled index is a constructed index, typically built by a carrier in partnership with an index provider, that targets a specified level of volatility by dynamically reallocating between an equity component and a cash or fixed-income component as measured volatility rises and falls.
