Turing Technology Introduces VA Industry's First True Solution to Hedge Stock Basis Risk

WILMINGTON, Del., Feb. 15, 2023 /PRNewswire/ -- The multi-trillion dollar Variable Annuity industry has never found a true solution to hedging the market-linked liabilities from individual stock basis risk.  This has created a significant business exposure for VA sponsors, an exposure which has only grown in the wake of new FASB rules requiring net hedging results to be marked-to-market. 

Turing Technology (Turingta.com) is pleased to introduce the first comprehensive solution to this business liability.  Turing's customized solutions provide maximum hedging flexibility, from layering on a hedge that only addresses the stock basis risk exposure to providing a comprehensive hedge for a single fund.

Turing's mutual fund replication technology, the Hercules System™, provides real-time, security level fund replication that has proven to be vastly superior to any such existing technology in the industry.  The resulting proprietary holdings data allows Turing to offer its clients the ability to accurately measure the true exposure, and then effectively hedge this risk.  Currently, stock basis risk is left entirely exposed from traditional beta-centric hedging programs. 

Vadim Fishman, CEO and co-founder of Turing, highlights the benefits.  "We know that our replication technology is best in class, and applying it to VA hedging is as pure an application as there is.  Our solution is the result of extended discussions and due diligence exercises with both VA sponsors on efficacy, and investment banks regarding executional efficiency and cost controls."

The need for Turing's solution has never been greater.  Industry reports suggest that only 85% of current market exposures are hedged¹.  For firms that sponsor tens of billions – if not hundreds of billions of VA's – this is a major business blind spot.  Insurance firms are required to build reserve accounts to back future payouts, and these reserve accounts have approached 50% of an insurance firm's capital in the past².  Finally, FASB ruling 2018-12, which became mandatory as of January 1, 2023, now requires that net hedging exposures are marked-to-market, which has the potential to create heightened earnings volatility.

For clients or prospects seeking more information about Turing's VA Hedging capabilities, please contact Seth Friedman at [email protected].  For all other requests please contact Turing at [email protected].

¹Variable Annuity Hedging, Milliman – 2019;   ²Chicago Fed Letter.

About Turing Technology (www.turingta.com):

Turing Technology is a technology and intellectual property firm founded in 2016 by two world-class applied mathematicians with a long history of innovation and entrepreneurism. Turing is not an investment management or advice firm. It is a technology company that licenses its technology and Intellectual Property to investment management, insurance, brokerage, RIA, and wealth firms to allow them to create and deliver superior investment solutions. 

For more information, contact:   
Barry Schwartz
[email protected]
212-677-8700 x118

SOURCE Turing Technology

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