Investors Lose Big in Variable Annuities that Invested in Hedge Funds


At least a half a dozen independent broker-dealers sold variable annuities reportedly issued by Sun Life Financial, Inc. that lost substantial monies investing in hedge funds. The hedge funds, which used a combination of put and call options to bet that the S&P 500 stock index would not vary outside of a certain range, lost between 75% and 90% of their value when the stock market crashed in 2008. Investors appear to have lost approximately $18 million in these products, and the Financial Industry Regulatory Authority is said to be investigating.

Variable annuities have “subaccounts” that are typically comprised of mutual fund-like investments. These investments ordinarily consist of stocks, bonds, or a combination of the two. A variable product with subaccounts consisting of private (Red D) investments like hedge funds is highly unusual to say the least.

There are two hedge funds involved in the Sun Life product: the Foresee Strategies Insurance Fund and the Foresee Strategies 3(c)(1) Insurance Fund. These hedge funds are apparently part of a group called SALI Multi-Series Fund, LP.

The broker-dealers that sold the hedge fund-laden annuities reportedly include Geneos Wealth Management Inc., Lincoln Financial Network, National Planning Corp., SagePoint Financial Inc., and FSC Securities Corp.

Recently, a FINRA arbitration panel reportedly awarded $284,000 to a customer of SagePoint who had invested in the SALI Multi-Series Fund and the SALI Multi-Series Fund 3(c) (1) LP.

Similarly situated investors may have compelling claims to recover their losses, but they should not delay as statutes of limitation may be nearing expiration.

Page Perry is an Atlanta-based law firm with over 150 years of collective experience maintaining integrity in the investment markets and protecting investor rights.