The Wall Street Journal turned its attention to what appears to be market timing inside variable annuities Friday morning.

The paper highlighted high turnover in the VAs of five providers: Sun America, Franklin-Templeton, Janus, Putnam and ING.

Since VAs are essentially insurance wrappers around mutual funds, they are open to timing-arbitrage trades. So far, though, that story has not leaked out of the fund industry for the most part. That means they are not on the radar screens of most reports, however they are on the SEC's radar screen.

"This has clearly become an area of focus for us," says Paul Roye, director of the SEC's investment management division. "It seems there's the potential here for the same kinds of [improper] trading we're finding in mutual funds."

The paper reports that regulators are looking at VAs in which sells far exceed the total assets in the annuity. One prominent case is the Putnam VT International Equity Fund's Class IB shares. That VA had $252.6 million in assets at the start of 2003, but has had redemptions and sales of more than $1 billion each.

One hedge fund that may have been timing VAs investing in international mutual funds is Chicago-based Clarion Capital LP. Clarion managed nearly $60 million in this style, reports the paper. 

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