Fidelity Debuts Target Volatility Portfolio

Fidelity Investments’ portfolio is offered through variable annuity and variable life insurance products, and seeks to manage total return volatility within a target range.  

The VIP Target Volatility Portfolio primarily invests in U.S. equities, foreign developed market equities, U.S. investment grade bonds, and cash through a combination of underlying Fidelity mutual funds as well as exchange-traded funds (ETFs) and index futures. The investment team has the flexibility to invest in other asset classes, such as high-yield debt and emerging market equities and debt.  

The managers seek a target portfolio volatility—defined as the measurement of the magnitude of up and down fluctuations of the fund’s return over a specified time period—of 10% over rolling one-year periods. The investment team develops volatility forecasts to adjust the portfolio’s asset allocation in response to periods of forecasted high or low market volatility. The portfolio’s strategy is implemented through a disciplined and integrated investment process that seeks to deliver a consistent risk and return profile, supported by Fidelity’s global research including an extensive asset-allocation research team.  

The VIP Target Volatility Portfolio uses a blended benchmark as an asset-allocation guide made up of the Dow Jones U.S. Stock Market Index (42%), MSCI EAFE Index (18%), Barclays U.S. Aggregate Bond Index (35%), and Barclays U.S. three-month Treasury Bellwether Index (5%).  

“Turbulent market swings like the ones we’ve witnessed over the past decade can far exceed the risk tolerance of many investors,” said Xuehai En, the lead portfolio manager for the fund. “We believe managing volatility provides the opportunity for more consistent returns over time.” 

Fidelity also said that Ohio National Financial Services and Jefferson National are the first insurance companies to package the portfolio in their annuity offerings, ONcore Individual & Group Variable Annuities (in New York, NScore variable annuities issued by National Security Life and Annuity Company) and Jefferson National’s flat-fee variable annuity, Monument Advisor.