Proprietary Index Strategies on Fixed Index Annuities (2026)

What a proprietary index actually is

Nearly every fixed index annuity sold today offers the S&P 500 as one crediting option, and most also offer at least one proprietary index alongside it. A proprietary index is a rules-based benchmark built by a bank or, in some cases, a carrier, specifically for use inside insurance products. It is not something you can buy or trade on its own; it exists only as a crediting mechanism inside an annuity contract.

The defining feature of most proprietary indices is volatility control. Rather than tracking a fixed basket of stocks the way the S&P 500 does, the index continuously shifts its mix between equities and a lower-return holding like cash or short-term bonds, aiming to keep its own volatility near a stated target, commonly 5%, 7% or 10% annualized. When measured volatility climbs, the index trims equity exposure and holds more of the lower-return asset. When volatility settles back down, equity exposure moves back up.

The result is an index that rarely captures the full move of a strong up market, but that also tends to hold up better than the broad market during a genuinely volatile stretch.

Why carriers build these indices in the first place

Options on the S&P 500 are not cheap. Implied volatility on S&P 500 options can run anywhere from the high teens to well above 20% during a stressful market, and that cost limits how generous a carrier can be with an uncapped or high-participation S&P 500 strategy.

A volatility-controlled index, by design, runs at a much lower volatility level, often in the 5% to 7% range. Options on a calmer index simply cost less to write. That lower cost stretches the carrier's option budget further, and carriers pass a meaningful piece of that savings on to buyers in the form of higher participation rates, frequently uncapped altogether.

The index itself is typically designed and maintained by a large investment bank, names like JPMorgan, Barclays, Bank of America and Societe Generale show up often, and the carrier licenses it for exclusive or near-exclusive use inside its own products.

Here is why the headline participation number can look so large: say a proprietary index is engineered to average around 4% a year, well below what the S&P 500 has historically returned. A carrier can afford to attach a hypothetical 150% participation rate to that index without taking on much risk, because 150% of a 4% return only works out to a 6% credit in an average year. The high participation percentage and the modest dollar outcome are both true at the same time, and understanding that relationship is the single most useful thing to take away from this page.

A few common proprietary indices and how they differ

JPMorgan MOZAIC II

A widely used multi-asset index that blends equities, fixed income and commodities alongside a volatility-dampening component, targeting roughly a 5% volatility level. Because it draws from several asset classes rather than tracking equities alone, it does not move in lockstep with any single market. In periods when both stocks and bonds have struggled at the same time, its more diversified mix has occasionally delivered a positive credit while a plain S&P 500 strategy paid nothing.

Barclays Trailblazer Sectors 5

A sector-rotation index that shifts among U.S. equity sectors based on recent momentum, held to a 5% volatility ceiling. Because it can concentrate heavily in whichever sectors have recently led, it can outperform in a market with strong, persistent momentum, but the same concentration and rotation costs can drag on results during choppier, directionless stretches.

SG Barclays Global MA

A globally diversified, multi-asset index with a 5% volatility target, spreading exposure across global equities, bonds and alternative assets rather than staying U.S.-focused. That global tilt means its returns are not tightly tied to U.S. market performance, which can work in a buyer's favor during years when markets outside the U.S. lead.

Bank of America ML Destinations 5

A trend-following, multi-asset index with a 5% volatility target that leans into momentum signals across equities, fixed income and commodities. It tends to do well in markets with a clear, sustained direction, and tends to struggle when trends reverse frequently in a sideways market.

Credit Suisse Momentum

A momentum-driven index that rotates among U.S. equities, international equities and fixed income based on which has shown the strongest relative momentum recently. Corporate changes affecting Credit Suisse have shifted how some of these products are offered, but the underlying index methodology has continued under successor licensing arrangements.

Beyond these five, you will also run into contracts built around the Bloomberg US Dynamic Balance II Index, the PIMCO Tactical Balanced ER Index, the Nasdaq FC Index, the BNP Paribas Multi-Asset Diversified 5 Index and the AQR DynamiQ Allocation Index, among others. Each has its own asset mix, provider and volatility target, but the underlying logic, controlling volatility to lower option costs and fund a richer participation rate, holds across nearly every one of them.

How to evaluate a proprietary index before you buy

Not every proprietary index deserves the same level of trust. Work through these five checks before allocating money to one.

1. Live history versus back-tested history. Most proprietary indices have less than five years of actual, live trading behind them. Anything shown before that point is back-tested, meaning the index's rules were applied retroactively to historical data the designers already had in hand. Back-tested results are almost always flattering for exactly that reason. Ask how many years of live history the index has, and treat a track record under three years of live data with real caution.

2. The volatility target itself. A 5% target is more conservative than a 10% target, spending more time in cash-like holdings during turbulent stretches, which dampens both the downside and the upside. A higher target behaves more like a traditional stock index and carries more risk along with it. Most buyers land somewhere in the 5% to 7% range as a reasonable middle ground.

3. The participation rate and how it is structured. A 100% participation rate sounds appealing until you check what the underlying index actually tends to return. A 100% share of an index averaging 3% a year can lose out to a modest cap on the S&P 500 in a genuinely strong year. Model both possibilities rather than reacting to the participation number alone.

4. Any spread or fee layered on top. Some proprietary index strategies subtract a spread or annual fee from the index's return before the participation rate is even applied. A 1.5% spread against an index averaging 4% a year effectively cuts your starting point to 2.5% before participation is factored in. Always ask whether a quoted participation rate is figured before or after any such fee.

5. Who actually built and maintains the index. Favor indices designed and run by an established, major investment bank rather than an obscure or newly formed provider. The bank controls the methodology and governance, not the carrier. If the index provider ever discontinues the index or undergoes a major corporate change, the carrier has to offer a replacement, and that replacement may behave quite differently.

When these indices tend to help, and when they tend to hold you back

They tend to outperform in:

• Flat or sideways markets, where an S&P 500 cap is never even reached
• Genuinely volatile years, since the volatility-control mechanism is built to soften drawdowns
• Years where diversified, multi-asset exposure pays off because stocks and other asset classes are not moving together

They tend to underperform in:

• Strong, sustained bull markets, where a healthy S&P 500 cap gets hit easily and the more dampened proprietary index falls short of it
• Calm, low-volatility bull markets, where the volatility-control mechanism still keeps some exposure trimmed even though the real market barely needed the protection
• Fast-reversing, choppy momentum markets, where a trend-following index is slow to adjust its allocations

There is no honest answer that says one approach reliably beats the other across a full ten-year contract term. Both are simply built to reward different conditions, and neither is designed to dominate in every kind of market you might live through during a long contract. That uncertainty is exactly why many buyers choose to split an allocation between a proprietary index and the S&P 500 rather than betting the whole contract on one crediting method, and why reviewing your allocation at each renewal, rather than only at the start, tends to serve you better over time.

Related crediting strategies

• Fixed index annuity guide
• S&P 500 crediting on FIAs
• Participation rate crediting
• Spread and margin crediting