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Services
• Group Annuity Contracts
• Individual Qualified & Non-Qualified Annuities
• Individual Annuity Quotes
• Group Annuity Rates
• Full Service 401K
• Funding Agreements
• VEBA
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Funding Agreements
Indexed funding agreements
are simply variable rate demand instruments issued and backed by the general
account of the issuing insurance company. As outlined in the SEC's Rule
2a-7's Miscellaneous Debt Instruments, Indexed Funding Agreements are
considered to have a maturity for purposes of Rule 2a-7 equal to the period
remaining until the next readjustment of the interest rate, provided that
the principal amount of the face of the instrument is scheduled to be paid
in 397 calendar days of less. Indexed Funding Agreements' Put Option (Demand)
is covered by Rule 2a-7's definition of an "Unconditional Put" or
"Unconditional Demand Feature" that details how a Demand Instrument can be
considered an Eligible Security either through a guarantee or through the
Requisite NRSOs in one of the two highest rating categories for long-term
debt obligations.
Brentwood's leading position in the placement of IFAs, currently $6 billion
outstanding, is a direct result of our ability to facilitate the entrance of
both new issuers (i.e. MetLife), and new end users into the marketplace. Our
emphasis in equally servicing the issuers' underwriting needs with the end users'
contractual and risk management needs has resulted in Brentwood generally having
"first-look" on new capacity from issuers and "last-look" on competitive bidding
situations from a majority of our clients.
The major life insurance companies issuing this product offer the following
provisions which are required for Money Market Funds to comply with SEC Rule 2a-7:
• Rate resets monthly or quarterly
• Interest paid monthly or quarterly
• Index based on 30 day commercial paper, 1-month or 3-month LIBOR
• Maturities are 397 days or less with a 7 day, 30 day, 90 day, or in
some cases 180 day put provision
Although most of these products offer a put provision, most investment funds have
never exercised this option. The put is only in place to comply with Rule 2a-7.
The funds use IFAs as a core holding and are purchased for yield enhancement over
the long-term. In fact, most funds still use these products in their portfolios
since their original purchases 2-7 years ago. IFAs are typically part of a fund's
10% restriction in illiquid investments usually treated as the last tier of liquidity
within the portfolio. Contract amounts vary from $25 million to $500 million.
If an IFA utilizes a 7 day put, it is classified as a liquid investment with a
Rule 2a-7 fund. Investment funds that are not regulated by SEC's Rule 2a-7 utilize
IFA's that incorporate maturities ranging from one year to five years with no put
demand feature.
For more information please contact
Neil Ronco at 800-642-2219.
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