Q&A: 2024 year-end fixed index annuity performance review

Salt Financial looks back on 2024 and examines the performance of FIA indexes through multiple lenses in this Q&A, with answers provided by Salt Financial President & COO Alfred Eskandar.

Market Performance Overview

Q: How did different asset classes perform over the year?
A: The year saw strong returns in U.S. equities and gold, which were among the standout performers. However, other asset classes, including international equities, small-cap stocks, and bonds, experienced weaker performance. The disparity in returns highlights the continued dominance of large-cap U.S. stocks and the resilience of gold as a safe-haven asset in uncertain market conditions.

Strategy Performance

Q: How did equity-only volatility-controlled strategies compare to multi-asset strategies?
A: Equity-only volatility-controlled strategies performed better than their multi-asset counterparts. This outperformance was largely due to the strength of U.S. equities, which provided a solid return base. Multi-asset strategies, which include exposure to underperforming asset classes such as bonds and small caps, struggled in comparison, as these assets did not contribute as positively to overall returns.

Index Performance

Q: What percentage of indices generated positive returns, and what does this indicate about market trends?
A: Approximately two-thirds of all indices produced positive returns, reflecting a generally strong market environment despite sectoral and asset-class variations. Notably, 87% of all equity-only indices ended the year in positive territory, underscoring the broad-based strength within equity markets. This suggests that indexes that maintained equity exposure, particularly in U.S. stocks, benefited from favorable market conditions.

Risk-Adjusted Performance

Q: How did risk-adjusted returns compare between the broader market and technology shares, and what impact did this have on volatility-controlled strategies?
A: The broader market, as measured by the S&P 500 (SPY), delivered better risk-adjusted returns than technology-focused stocks represented by the Nasdaq-100 (QQQ). While technology stocks experienced strong absolute returns, they were accompanied by higher volatility, which reduced their efficiency on a risk-adjusted basis. This dynamic impacted volatility-controlled strategies, as these approaches typically adjust exposure based on risk metrics. The lower volatility of the broader market led to a more favorable environment for managing risk within these strategies.

This report compiled by InsuranceNewsNet staff.