I have been reading articles on variable annuities lately and they are all saying the same thing, variable annuities under perform the market. What about variable annuity sub-account performance, do they really under perform? This is a great question.

Variable annuities have been beaten up and torn apart by the critics who say that variable annuity sub-accounts do not perform as good as regular mutual funds, specifically index mutual funds. Well, where is the surprise in this revelation? There is none. Sub-accounts are not mutual funds; this may come as a surprise to many of the variable annuity bashers out there. Sub-accounts are mutual fund like investments, a good example of this is you do not own shares you own units instead.

The investments may be very similar to the mutual fund it mimics, but all in all they are different. Mutual funds tend to have more cash on hand to prepare for liquidations; sub-accounts have a longer retention rate of investors so they do not have to plan for mass liquidation if the market goes down. If you look at Fidelity