stable value fund
the battelle stable value fund seeks to provide current and stable income, while maintaining a stable share value of $ 1 .
separately managed stable value fund for larger plans seeking to create a diversified portfolio .
the mellon stable value fund has not veered from the standard 12 - month exit provision .
should you favor a stable - value fund over an intermediate - term mutual fund? conservative investors may prefer stable value. but those who can tolerate some risk could choose intermediate funds - - or perhaps hold a mix of stable value and intermediate funds .
stable value funds remain popular options in many defined contribution plans. a recent vanguard study indicates that 57% of defined contribution plans offer a stable value fund .
primarily, stable value fund investors should look for the fund that doesn' t cost too much. generally a fairly priced stable value fund will charge fees of less than 0. 50% . be wary of stable value funds charging 1% or more. you have to weigh the cost against benefit .
i blurted the answer before she could say it: “they all went into one fund … and it was the stable - value fund. ”
the stable - value fund at megacorp is currently paying about 2. 3% . here is some performance data versus the bond index fund :
stable value funds can provide value to your 401 (k). (c) samxmeg / getty images
stable value funds attempt to maintain a stable share price, but the assets underlying the fund vary as interest rates, prepayment behavior and credit spreads change. there is almost always a difference between the book value of the assets, expressed by the nav, and the market value. when the stable value fund has a higher market value than book value, typically it pays an above market yield .
a stable value pooled fund manager may need up to 12 months’ notice before implementation of a re - enrollment .
plan has investment options in mutual funds and they also have a stable value fund option. the mutual funds are offered through one of the large mutual fund companies and the stable value fund is managed by a separate investment company. the company that manages the stable value fund does not file as a dfe. this stable value fund used to be invested totally in a gic from 1 large insurance company. that insurance company provided sch. a info and everything was fine. during the plan year the gic assets were transferred to this other investment company and the fund became the stable value fund, which has investments in a number of different gic' s and other stable assets .
while most stable value options seek to preserve capital and provide competitive returns, there are significant differences among the most common stable value options — guaranteed insurance accounts (i. e. , lincoln stable value) and collective investment trusts. an important part of the stable value selection process is understanding these differences and working with stable value providers who have experience and success managing stable value assets through varying market conditions. watch this video to learn more !
stable value funds represent 12% of all dc plan assets, and are in almost 50% of all dc plans¹. however, stable value funds are the least understood and evaluated fund in an investment lineup. stable value navigator allows for the side - by - side evaluation of up to eight funds, providing a detailed comparative analysis of most stable value offerings. stable value navigator assists advisors in performing an in - depth analysis of stable value funds, and adds unique value to what an advisor provides plan sponsor clients .
with a yield that high, i' d consider the stable value fund a legitimate part of your fixed income allocation. when i held a similar equity allocation to yours, with a minimum 3% yield on our stable value fund, i evenly split my 30% fixed income allocation between total bond market, lt tips, and the stable value fund .
an equity fund is a type of fund that uses investors' capital ...
a mutual fund wrap, also known as a mutual fund advisory program ...
12% intermediate treasuries 5. 25 yrs duration avg 9% tips fund duration 8. 1 yrs 7% stable value
all investments have risks, however stable value works to minimize risk wherever possible .
select the stable value investment option best suited to the needs of your plan .
55 stable value product profiles available, more to be added by advisor request .
i' m actually blown away that you' re getting
near 3% returns
with your stable value fund. we recently solicited offers for stable value funds for our dc plan and they best we could find was 2. 25% with voya. may i ask whom your company uses for your stable value fund ?
the 401k has a variety of equity mutual funds, a mm (money market) fund, and a bond fund. the forbidden trade is from the stable value fund into the mm fund. transferring into the bond fund (intermediate term) or the equity funds is ok, but money transferred must remain there 90 days before going into the mm fund. you can' t do a direct transfer from the stable value fund to the mm fund without going through one of the other aforementioned funds for 90 days .
you should also try to educate yourself about how fund withdrawals or redemptions work. participants in stable value funds are not subject to any waiting periods of surrender charges. but there may be a provision that prevents you from moving funds from a stable value fund to a competing fund, or a short - term bond fund or money market fund. you may have to wait 90 days .
fees on stable value funds do tend to be higher, especially compared to an index fund of anything, bonds or stocks .
yes, stable value investment options, investment contracts, investment managers, and other service providers such as insurance companies involved in stable value have multiple layers of regulatory oversight .
i just checked my 401 (k) stable value fund restrictions. you' re right. amounts that are transferred out of a stable value account must remain in another fund before transfer into a self - managed account for 90 days. to take a guess, it must have something to do with the insurance contract obligations for stable value funds. i' ll wait for the experts to answer. new wiki page: please see stable value fund on the bogleheads wiki .
all my bonds - high - yield and munis - have had a negative return this year, but not the stable value fund .
a stable value fund is a conservative fund investment, kind of like a money market fund. yet stable value funds are known to offer slightly higher yields than money markets, without too much additional risk. a stable value fund is an investment known for preservation of capital. in other words, the funds retain the value of your cash, regardless of what the stock or bond markets are doing. it' s low risk, but the return you get is low as well .
the stable value fund that i had in my old 401k did not have any restrictions on it. that' s the one fund i really miss since my rollover to vg .
ladygeek wrote: i just checked my 401 (k) stable value fund restrictions. you' re right. amounts that are transferred out of a stable value account must remain in another fund before transfer into a self - managed account for 90 days. to take a guess, it must have something to do with the insurance contract obligations for stable value funds. i' ll wait for the experts to answer. new wiki page: please see stable value fund on the bogleheads wiki .
a stable value fund may seem like mutual funds, but they are structured and managed slightly differently. they come in a few types :
there' s a trade - off for stable value' s money market beating yields .
according to the stable value investment association, approximately $ 821 billion is invested in stable value funds, or almost 12% of the estimated $ 7 trillion in retirement plan assets .
there are two main types of stable value funds: collective investment trusts and direct contracts .
comparison of lincoln stable value (a guaranteed insurance account) vs. typical collective investment trust
choosing the right stable value manager is critical to helping your participants achieve their target outcomes .
even with this protection, stable value funds aren' t always successful in their efforts to preserve principal. defaults in the underlying bonds can fall outside the contractual guidelines that protect principal value, as can corporate events such as layoffs or early retirement programs that create a run on the assets of the stable value fund. often, however, the stable value fund will work with the 401 (k) plan sponsor to anticipate corporate events that could destabilize the fund .
of the employers that changed or replaced their money fund, nearly 13% added a stable value fund and 61% adopted government money funds, which were not affected by the rule changes .
z3r0c00l wrote: fees on stable value funds do tend to be higher, especially compared to an index fund of anything, bonds or stocks .
closed - end funds have a fixed number of fund units during the tenor specified in the fund contract. fund units may be traded on lawfully organized stock exchanges, but fund unit holders are not allowed to apply for early redemption of their fund units .
in stable value investing, gics and wraps are essentially two of several types of investment contracts .
stable value investment options do not exist in publically available investment vehicles, such as mutual funds .
1 svia investment & policy survey for 2016, stable value investment association, 2016, urltoken .
in those cases, the oversized helpings of stable value are common — and that’s a problem .
ordinarily, the restriction is required and elaborated by the manager of the stable value fund. the reason mmfs in particular are singled out is to prevent investors from moving their money from a stable value fund to a mmf during times of rising interest rates when the yield on a mmf will increase at a faster rate than the yeild from a stable value fund due to the duration of each fund' s holdings. a large movement of money from one to the other would result in the stable value fund having to liquidate assets to honor redemptions to the detriment of the fund and those who remain with it. the purpose of requiring investors to move their money to bond funds or stock funds for a 90 day window is to force participants to put their money
at risk
prior to gaming the spread between a stable value fund and a short term fixed income fund, i. e. mmf .
helot wrote: ordinarily, the restriction is required and elaborated by the manager of the stable value fund. the reason mmfs in particular are singled out is to prevent investors from moving their money from a stable value fund to a mmf during times of rising interest rates when the yield on a mmf will increase at a faster rate than the yeild from a stable value fund due to the duration of each fund' s holdings. a large movement of money from one to the other would result in the stable value fund having to liquidate assets to honor redemptions to the detriment of the fund and those who remain with it. the purpose of requiring investors to move their money to bond funds or stock funds for a 90 day window is to force participants to put their money
at risk
prior to gaming the spread between a stable value fund and a short term fixed income fund, i. e. mmf .
in europe, a number of companies are employing the
reverse distribution mechanism
in order to keep the fund' s net asset value at $ 1 a share. this involves canceling shares in the fund in order keep the net asset value stable .
to that point, 65 percent of u. s. retirement plans offer a stable - value fund, according to callan associates, an investment manager .
now on the doorstep of retirement, i keep about 24% of the 56 / 44 portfolio in a 2. 7% stable value fund, with 20% of the portfolio equal to 5 years' worth of withdrawals, and the stable value fund constituting a (practically) risk - free holding .
stable value funds are usually found in 401 (k) plans. image source: getty images .
the october rule was an additional boost for stable value, but stable value had already been mostly favored relative to money markets as an option on a dc plan ,
mr. karam said .
many participants embrace stable value for their conservative allocations and as a refuge in times of market volatility .
following the credit crisis of 2008 a number of fi ms exited the stable value market. standish’s conservative investment approach and innovative solutions have allowed it to be the respected stable value provider it is today .
our stable value management team has an average tenure of 15 years and 19 years of investment experience .
if an asset in a stable value fund defaults, the fund will likely temporarily suspend withdrawals while it pursues one or two courses of action. if the loss is small, they might buy a wrap contract for the loss, which will haircut the yield on the stable value fund for the life of the wrap contract. if the loss is big, they will reduce the nav, and attempt to keep the nav stable from there. given the history of money market funds breaking the buck, it is possible that the fund manager might pony up the funds to make the stable value fund whole, but i wouldn’t rely on that .
risk associated with stable value fund? ? i seldom hear any discussion of the risks of stable value fund, namely the ability of the issue to pay. there' s no fdic coverage or even implicit promise by any government agency to protect investors in stable value funds. i would do a lot of due diligence on the insurance company standing behind these plans. black swan events aren' t expected but do happen .
my vote: stable value, and if the risk / return tradeoff changes consider switching to intermediate bond .
make sure you check the fees before making a decision. but, with no other information, 2% sounds really good for a stable value fund right now .
my stable value fund in the 457b currently pays 2. 75% . i' ll take it. it is composed of approx. 65% voya stabilizer and 35% prudential guaranteed long term fund (whatever these are .
because of regulatory rules, stable value as an asset class is not available in either iras or taxable accounts .
definity would use stable value in this current interest rate environment. you can always switch to bond funds later .
there is a risk that in an environment where interest rates have risen sharply, that a stable value fund would have a lower market value than book value, with a below market yield. in a situation like this, particularly when the yield curve inverts, there is a risk that shareholders in the stable value fund will leave in search of higher yields. if that happens to a high degree, it will worsen the gap between the market value and book value of assets, which will be covered by the wrappers in the short run, but will reduce the fund’s yield as they pay the wrappers back .
while stable value has its share of issues when you stack it up against other fixed - income options in a 401 (k), it still comes out on top ,
says chris tobe of stable value consultants .
an equity wash is a contractual provision in a stable value investment option that requires any transfer a participant makes from the stable value investment option to a competing option to first be directed to any other investment option for a period .
it’s important for consultants to highlight that an insurance company’s guaranteed insurance stable value fund can provide safety, liquidity and yield when discussing defined contribution investment options. for clients that have employees looking for stable investment options as part of their retirement planning, guaranteed insurance stable value funds can serve as a more conservative product offering to help protect plan participants’ savings .
note that stable value funds are mostly available only in 401 (k) s. so if you switch jobs or retire, rather than rolling all your money into an individual retirement account, you may want to leave some in your old employer' s plan to maintain access to a stable value, says kelli hueler, whose hueler cos. tracks stable value fund performance. retirees often miss that opportunity, she adds ,
because many financial advisors aren' t aware of all the benefits of stable value .
my 401 (k) plan has a stable value fund that currently pays a preannounced annual rate of 5. 30 percent. the fund enters into guaranteed investment contracts (gics) with insurance companies which invest in government and corporate bonds and mortgages. i’ve heard that stable value funds can now be purchased outside of retirement plans. does anyone know of any fund families or brokers that offer these funds to individual investors ?
more than 13% of the $ 5. 2 trillion in dc plans is invested in stable value funds. 4
invesco is in a select group of managers with extensive stable value expertise and large fixed income scale. with experience in this asset class since 1985, invesco is one of the largest and most experienced stable value managers in the country .
most young investors should only hold a small allocation to stable value funds, cautions winfield evens, director of investment strategy for consultant aon hewitt' s defined contribution unit .
it may make sense to keep a fraction of your money in a stable value fund and away from market risk ,
says evens .
but over 20 or 30 years, stable value investments may not keep pace with inflation .
others have switched to a plan sponsor termination provision, where the plan receives the lesser of market value or book value at the time of withdrawal — a risky proposition for a plan sponsor trying to maintain a stable principal value .
while stable value funds provide book value coverage for participant - directed activity (withdrawals, transfers, etc .), book value coverage is limited for distributions resulting from plan sponsor - directed events such as a re - enrollment .
linguini wrote: make sure you check the fees before making a decision. but, with no other information, 2% sounds really good for a stable value fund right now .
dziuniek wrote: my stable value fund in the 457b currently pays 2. 75% . i' ll take it. it is composed of approx. 65% voya stabilizer and 35% prudential guaranteed long term fund (whatever these are .
over $ 821 billion is invested in stable value funds. approximately half of all 401 (k) plans offer a stable value fund and some 529 college savings plans also offer this conservative type of investment. the low risk nature of this type of investment provides stable, consistent returns that can help provide portfolios with additional diversification options in an overall asset allocation strategy .
that' s comparing apples and oranges, as dodix is a bond fund, and bond funds do not have a stable value. dodix is an investment - grade bond fund, so maybe better to compare to other investment - grade bond funds .
in some key respects stable value funds resemble intermediate - term bond mutual funds. both kinds of funds invest in portfolios of bonds. when interest rates rise, the value of the bonds tends to fall. if that happens, a shareholder in a typical bond mutual fund could lose principal. in contrast, a saver who makes a withdrawal from a stable value fund would not suffer because the insurance contract protects against principal losses .
i too am of the opinion that stable value is a good proxy for a bond fund allocation. we have most of our non equities in stable value paying between about 3% and 4. 25% . remember that part of the purpose of holding non equities is to preserve capital during a downturn .
stable value funds have diversified portfolios of fixed - income securities that closely resemble what you' d find in a typical bond fund. however, stable value funds take an additional step to protect their investors from the interest rate fluctuations that so often cause traditional bond funds to suffer dramatic swings in their share price. specifically, stable value funds enter into contracts with banks or insurance companies that are specifically designed to offer rate protection .
an s & p global ratings principal stability fund rating (psfr), also known as a
money market fund rating ,
is a forward - looking opinion about a fixed - income fund' s capacity to maintain stable principal (net asset value, or nav) and to limit exposure to principal losses due to credit risk. when assigning a principal stability rating to a fund, s & p global ratings' analysis focuses primarily on the creditworthiness of the fund' s investments and counterparties, and also its investments' maturity structure and management' s ability and policies to maintain the fund' s stable net asset value .
because they hold longer maturities with lower - quality issues, intermediate funds tend to yield about a half - percentage - point more than stable value funds. the extra yield should enable the intermediate funds to outperform stable value over the long term .
i invest 50% in stable value, nice conservative way to keep your money intact while the other 50% grows .
until stocks turned around a few weeks ago, just about every investment in your 401 (k) had let you down — except one. the so - called stable value fund has continued to deliver on its promise to combine the safety of a money market fund with the higher returns possible from an intermediate bond fund .
what i did was put a new column in the simba backtesting spreadsheet with historical data on my stable value fund (tiaa - trad), and then used the spreadsheet' s tool for exploring alternative portfolios. it didn' t really change the overall picture very much. but it makes sense to use more accurate data for your stable value fund instead of using a proxy .
i have virtually all of my fixed allocation in a 3. 46% (net of expenses) stable value fund - - - - to me it is a
no brainer .
perhaps this is a better explanation
with all of that as a backdrop, let' s look again at the objective of a stable value fund: a higher return while maintaining a stable net asset value with a little more risk than a money market fund .
urltoken... funds. html yes, both mmfs and stable value funds attempt to maintain a stable asset value, but stable value funds attempt to do this by investing farther along the yield curve and with the help of insurance contracts. the cost of liquidating these assets in an environment of rising interest rates is expensive to the fund and its remaining investors. other options such as short term and intermediate bond funds make no pretense of maintaining a
stable net asset value
so are inappropriate comparisons. it is understood that these investments can and will lose money on a day to day basis. also check out this explanation: urltoken... - wash. html
plan sponsors and consultants have asked the very reasonable question, how will my stable value fund perform in an environment of rapidly rising rates? while not our base forecast, this paper explores how stable value funds fared in prior episodes of rising interest rates, and offers some observations and general comments on the current environment .
helot wrote: perhaps this is a better explanation
with all of that as a backdrop, let' s look again at the objective of a stable value fund: a higher return while maintaining a stable net asset value with a little more risk than a money market fund .
urltoken... funds. html yes, both mmfs and stable value funds attempt to maintain a stable asset value, but stable value funds attempt to do this by investing farther along the yield curve and with the help of insurance contracts. the cost of liquidating these assets in an environment of rising interest rates is expensive to the fund and its remaining investors. other options such as short term and intermediate bond funds make no pretense of maintaining a
stable net asset value
so are inappropriate comparisons. it is understood that these investments can and will lose money on a day to day basis. also check out this explanation: urltoken... - wash. html
timing and feasibility for separately managed stable value portfolios may vary depending upon market conditions or how the re - enrollment is designed .
in my career, i have run a gic (guaranteed investment contract) desk at an insurer, designed one stable value fund, and helped administer and invest for several others. i know stable value funds, respect them, invest in them when it makes sense, but i am still a skeptic at some points .
in practice, stable value funds have survived other sponsors’ bankruptcies without a hitch. even enron employees who invested in their 401 (k) ’s stable value fund did not lose a cent. and remember that despite the dip in december, the lehman fund gained 2. 2 percent overall in all of 2008. not too shabby, considering the spectacular dives in nearly every other investment option .
my stable value fund has an er of 0. 30% which makes it one of the highest ers in my portfolio. it' s a sizeable chunk also, half of my 401k .
jim roche has been in the retirement industry for over 20 years. prior to joining the standard, jim was the senior stable value analyst for westminster consulting in rochester, new york. before that he served as vice president of institutional stable value sales for prudential. for more information on guaranteed insurance stable value funds, contact jim at [ email protected ] or 732. 815. 2116 .
i added a new section to the wiki page and pointed back to this thread. please see stable value fund on the bogleheads wiki. comments / questions are welcome. wiki editors can update directly .
as historically low interest rates hold money fund yields down to around 50 basis points or lower, it' s not uncommon for stable value funds to be yielding 1. 5% net of fees .
the exit provision is the notice period a plan sponsor must give before exiting a collective fund and receiving book value for its withdrawal .
you’re looking for investments that offer stability, liquidity, yield, and principal protection. understand the differences among your stable value options .
we focus on carefully managing the trade - off of portfolio duration relative to yield, and maintaining stable value through all rate environments .
according to mr. stewart, every new insurance contract has to be researched and monitored .
each insurance contract determines how the stable value fund portfolio can be invested ,
he said .
and each contract can have different guidelines, even in the same fund .
sconie wrote: i have virtually all of my fixed allocation in a 3. 46% (net of expenses) stable value fund - - - - to me it is a
no brainer .
in recent years, stable value funds have served as workhorse investments, accounting for 12% to 15% of assets in 401 (k) and other defined contribution retirement plans. the funds have $ 540 billion in assets, according to the stable value investment association .
as a 401k plan advisor, this uncertainty provides an opportunity. for sponsors with employees demanding more conservative investment vehicles, a guaranteed insurance stable value fund could be the ideal fit, as it potentially provides plan participants with safety of principal, liquidity and a stable rate of return .
why do 401k' s that have a stable value fund as an investment option among others choices have restrictions as to where you can transfer that money to for the following 90 days? from reading online, i understand that stable value funds lag interest rate changes, and that' s the
reason .
but how is that different from any other 401k that may have a variety of bond fund options to choose from, each fund behaving differently to changes in interest rates? there' s generally no restrictions with moving money between bond funds and money markets, so why the special rules for stable value funds? thanks !
book value payout can be immediate or over time, depending upon the plan' s election. the stable value account remains fully benefit - responsive upon contract termination, and discontinuance fees do not apply .
an investment approach that provides tremendous flexibility — clients can choose from a variety of existing strategies, or a highly customized stable value design .
in my opinion, a stable value fund is a good substitute for bonds if you have no good bond choices in your work plan. or if it consistently pays near as much as or more than bonds .
i use the stable value fund in my 457 yielding 2. 9% . i put about half of my fixed income allocation into it. in my mind, it also serves as a cash allocation - my cash needs are inside my 457. i can sell taxable equities, then buy equities in my 457 with the stable value fund without changing my asset allocation. as a result, i don' t have a traditional emergency fund. i have a cash allocation earning 2. 9% .
most are only offered through 401k, 403b, or 457 accounts. one limitation of stable value funds is that they typically limit withdrawals and transfers from the funds to a certain percentage per year and / or upon obtaining a certain age (60 or 62 for example). this allows the stable value fund to extend maturities a bit for better yields .
ualdriver wrote: why do 401k' s that have a stable value fund as an investment option among others choices have restrictions as to where you can transfer that money to for the following 90 days? from reading online, i understand that stable value funds lag interest rate changes, and that' s the
reason .
but how is that different from any other 401k that may have a variety of bond fund options to choose from, each fund behaving differently to changes in interest rates? there' s generally no restrictions with moving money between bond funds and money markets, so why the special rules for stable value funds? thanks !
it’s no secret that many stable value funds are now underwater, with their underlying bond portfolios worth less than the guarantees, as lehman’s fund was. if your company were to go bankrupt with an underwater fund in its 401 (k), a lehman - like loss is theoretically possible .
the protection from interest rate ebbs and flows is a unique feature all guaranteed insurance stable value funds offer, regardless of the invested asset performance .
the biggest single distinction between stable value funds and money funds is the yield, which can represent a gap of 100 basis points or more .
to find out how lincoln stable value solutions can help you support positive retirement outcomes, call our sales desk at 855 - 533 - 2170 .
^ indeed. for reference, my employer stable value is posting a yield of 1. 78% . caution and questions may be warranted .
when investors subscribe for funds, they will be given a certain number of fund units or shares whose value will change with the fluctuation of the net asset value of the funds. the price of each unit or share reflects the net asset value plus or minus any disclosed charges .
an s & p global ratings fund credit quality rating, also known as a
bond fund rating ,
is a forward - looking opinion about the overall credit quality of a fixed - income investment fund. fund credit quality ratings, identified by the' f' suffix, are assigned to fixed - income funds, actively or passively managed, typically exhibiting variable net asset values. they reflect the credit risks of the fund' s portfolio investments, the level of the fund' s counterparty risk, and the risk of the fund' s management ability and willingness to maintain current fund credit quality. unlike traditional credit ratings (e. g. , issuer credit ratings), a fund credit quality rating does not address a fund' s ability to meet payment obligations and is not a commentary on yield levels. fund credit quality ratings are accompanied by fund volatility ratings (i. e. ,' af / s3') - - when fund volatility ratings can be assigned - - to communicate our opinion about certain risks not addressed by a fund credit quality rating .
moreover, not all stable value funds are created equal. if you work for a small or midsize employer your fund might rely on a single insurer and could be at risk if that insurer became insolvent, as happened two decades ago with
guaranteed investment contracts
and executive life. pooled stable value funds, more common at larger companies, use multiple insurers. significantly, in march bond giant pimco launched a pooled fund for midsize employers .
if i' m picking funds for the bond segment of my allocation and i' m working the us bonds portion, i have the following choices: a stable value fund in my fidelity 401k fund, currently paying about 2% yield, or intermediate bond funds are paying slightly more, say 2. 1% , but with a duration of around 5 years. given interest rates are far more likely to go up than down, is there any reason not to choose the stable value fund? am i correct in considering it to effectively have a duration of zero? i know there is a slight default risk in the stable value fund, but it still seems like the correct choice. could not get a straight answer from fidelity .
both are bond portfolios wrapped in insurance contracts to guarantee stable value and a certain yield, but a collective investment trust diversifies the risk across multiple insurance contracts, while direct stable value funds are insured directly by the issuer' s own balance sheet, essentially becoming their own guaranteed investment contract .
to summarize, while stable value funds are not risk free, they remain a viable, low - risk option for defined benefit plan participants. plan sponsors should work with their advisors to identify well established stable value products managed with an eye on interest rate, credit and liquidity risk controls .
wrap capacity is dependent on external insurance companies and banks to provide guarantees. book value contracts issued to fund and terms not disclosed to a plan .
stable value funds invest in fixed - income investments and wrap contracts or
wrappers
offered by banks and insurance companies. wrap contracts generally guarantee a certain principal and interest rate of return, even if the underlying investments decline in value. so they offer even more protection from interest rate volatility from bonds. the rate of return remains stable, even when everything else is not. that doesn' t mean they never lose value. during the market turmoil of 2008, stable value funds declined in value slightly, another victim of the failure of lehman brothers and resulting credit crunch .
what' s not to like? restrictions on withdrawals are a drag compared with money market funds. to prevent yield chasing, most stable value funds prohibit transfers to similar options, such as a money market or short - term bond fund. instead, you have to move your money first to, say, a stock fund, for 90 days or so. (cash withdrawals have no waiting periods .) and in the rare case that your employer ends its participation in a stable value fund, your money might be held for up to 12 months (still earning a return) as the fund unwinds .
markwhy wrote: if i' m picking funds for the bond segment of my allocation and i' m working the us bonds portion, i have the following choices: a stable value fund in my fidelity 401k fund, currently paying about 2% yield, or intermediate bond funds are paying slightly more, say 2. 1% , but with a duration of around 5 years. given interest rates are far more likely to go up than down, is there any reason not to choose the stable value fund? am i correct in considering it to effectively have a duration of zero? i know there is a slight default risk in the stable value fund, but it still seems like the correct choice. could not get a straight answer from fidelity .
i added coobert' s article to the wiki' s
external links
section, as well as a suggested overview update from peter foley. wiki article link: stable value fund comments / questions / concerns are welcome .
nevertheless, stable value funds tend to offer higher returns than money market funds and other low - volatility alternatives, and so many 401 (k) plan participants in plans that offer stable value funds appreciate the diversification they offer. for those seeking long - term capital appreciation, stable value funds won' t provide the level of growth most people need to achieve their retirement goals. however, as a component of a balanced portfolio that includes more growth - oriented investments, stable value funds can reduce overall portfolio risk while avoiding some of the key pitfalls of many fixed - income investment options .
ever since the sec upgraded its rules for money - market funds last fall, retirement plan advisers have been giving stable value funds a second look .
of the more than 250 retirement plans under sheridan road' s advisement, mr. karam said 95% include some form of stable value offering .
i too would go with the stable value alternative. my wife and i have more than half of our fixed in stable value funds, all of which are earning more than 3% . there are some withdrawal restrictions, but this is not money we need to access in the near future .
a fund volatility rating is a forward - looking opinion about a fixed - income investment fund' s volatility of returns relative to that of a
reference index
denominated in the base currency of the fund. a reference index is composed of government securities associated with the fund' s base currency. fund volatility ratings are not globally comparable. fund volatility ratings reflect our expectation of the fund' s future volatility of returns to remain consistent with its historical volatility of returns. fund volatility ratings reflect s & p global ratings' view of the fund' s sensitivity to interest rate risk, credit risk, and liquidity risk, as well as other factors that may affect returns such as use of derivatives, use of leverage, exposure to foreign currency risk, and investment concentration, and fund management. different symbology is used to distinguish fund volatility ratings from s & p global ratings' traditional issue or issuer credit ratings. we do so because fund volatility ratings do not reflect creditworthiness but rather our view of a fund' s volatility of returns .
some investors think of stable value funds as bank accounts. the funds protect principal and pay interest. but the stable value accounts are not guaranteed by the federal deposit insurance corp. instead the returns of the funds are protected by insurance contracts known as wraps that are offered by banks and insurance companies .
for now, though, hueler points out that stable value funds are typically not dependent on a single wrapper or type of contract. losing one wrapper means the fund manager would reallocate those dollars to a different wrap or contract provider. worst - case scenario: if a fund lost a wrapper and couldn’t get a replacement, the fund’s manager would swap the previously wrapped bonds for ultra - safe cash investments, getting a money market - like return until another book - value contract could be put into place. the upshot: the fund’s yield would drop, but its value would not suddenly become subject to bond market fluctuations .
open - ended funds do not have a fixed number of fund units. units can be subscribed and redeemed at the time and venue agreed in the fund contract .
the tool is designed to help advisors bring a procedurally sound due diligence process to the evaluation and ongoing monitoring of stable value products in their clients’ portfolios .
synthetic gic: the account invests in a portfolio of fixed - income investments
wrapped
in insurance contracts that protect the underlying value of the investment. these make up a good percentage of today' s stable value funds .
wash restrictions reduce some of the risk in stable value funds. the underlying assets are pretty stable, but may include bonds or other assets that can fluctuate in value and which can incur real losses if liquidation is forced. however, a
book value
is assigned for the investor (principal plus interest). if the assets' market values have fluctuated downward and bond fund interest rates pop upward, investors would quickly move from stable value to the bond funds, thus forcing mass liquidation of assets that can' t cover the investors' book values. the insurance company (ies) guarantying the book value could potentially be overwhelmed by redemptions and unable to cover the gap ...
so what’s a stable value fund? it’s a short - to - intermediate term fixed income pool that has some agreements on the side to allow the assets to be accounted for at book value, so that the investment accrues at a positive rate. it looks like a savings account to the investor, not a short - to - intermediate term bond fund. because it invests at longer maturities than money market funds, they deliver higher yields than money market funds, except in years worse than 1994, where yields rise rapidly and the yield curve inverts. (stable value funds did not exist in the 1979 - 1981 era; perhaps money market yields would have been higher than stable value yields would have been then. the precursor to stable value funds, initial participation guarantee funds, ran into trouble then. that trouble led to the development of gics. )
and for me, the restriction is moving from an sv fund to a self - managed account (outside the 401 (k) plan) .
amounts that are transferred out of a stable value account must remain in (another 401 (k) fund) before transfer into a self - managed account for 90 days .
iow, there are no restrictions between the sv fund and other funds within the same 401 (k) plan. update: removed comment about fund managers .
a fund is a source of money that is allocated for a specific ...
cerulli study says mutual fund companies and wealth managers are swimming in the same channels .
overseas investment plan - qdii offshore fund / overseas investment plan - qdii overseas bond .
capital gain potential - you can benefit from capital appreciation if fund prices move up .
the fund' s portfolio is predominantly exposed to defaulted assets and / or counterparties .
your 401 (k) may call its stable value option something else, like a capital preservation fund or fixed - interest fund, but whatever the name, it' s essentially the same thing: a portfolio of bonds and other low - risk investments guaranteed against loss by a collection of insurance companies. last year, the average stable value fund returned 4. 58 percent, compared with 2. 89 percent for money markets and 5. 07 percent for intermediate bond funds. investors fleeing stock funds in their ravaged 401 (k) s transferred more than $ 5 billion into stable value funds last year; these funds now make up more than 36 percent of 401 (k) plan assets, according to hewitt associates .
a national scale fund credit quality rating is a forward - looking opinion about the overall credit quality of a fixed - income investment fund relative to that of other fixed income investment funds in the national market. national scale fund credit quality ratings, identified by the' f' suffix (as are the global scale fund credit quality ratings), are assigned to fixed - income funds, actively or passively managed, typically exhibiting variable net asset values, and also include a country prefix denoted as' xx'. national scale fund credit quality ratings reflect the credit risks of the fund' s portfolio investments, the level of the fund' s counterparty risk, and the risk of the fund' s management ability and willingness to maintain current fund credit quality. unlike traditional credit ratings (e. g. , issuer credit ratings), a national scale fund credit quality rating does not address a fund' s ability to meet payment obligations and is not a commentary on yield levels. national scale fund credit quality ratings are accompanied by national scale fund volatility ratings (i. e. ,' xxaf / xxs3') - - when national scale fund volatility ratings can be assigned - - to communicate our opinion about certain risks not addressed by a fund credit quality rating .
oney - market funds and others, known as stable value funds, act as cash equivalents; they provide small and steady returns, along with principal protection .
your opportunity to invest in stable value funds outside of 401 (k) / defined contribution world has gone away, but given that there is over $ 200 billion invested in stable value funds, and not much has been written on them from a third party point of view, i’ll describe them in more detail .
portfolio7 wrote: stable value funds are typically bonds with an insurance wrapper, and act like cash with a near 3% return (in my plan) .
the beauty of a good stable value (sv) fund (or good direct cds, the tsp g fund, etc .) is that it provides a higher expected return than short - term treasuries but with not a huge amount more risk. the risk is absorbed by the insurance company in return for liquidity constraints on the fund, so essentially you are receiving a rich liquidity premium. it has almost no term risk, compared with significant term risk for an intermediate - term treasury fund, and although it has some credit risk, historically this credit risk has been minimal. the only sv fund loss i know if is a small loss in 2008 in the sv fund used by lehman, and even that fund had a positive return for the year.
a stable value fund is a type of investment available in 401 ( k ) plans and other defined contribution plans as well as some 529 or tuition assistance plans . stable value funds are often made available in these plans under a name that intends to describe the nature of the fund ( such as capital preservation fund , fixed-interest fund , capital accumulation fund , principal protection fund , guaranteed fund , preservation fund , or income fund among others ) . they offer principal preservation , predictable returns , and a rate higher than similar options without proportionately increasing risk . the funds are structured in various ways , but in general they are composed of high quality , diversified fixed income portfolios that are protected against interest rate volatility by contracts from banks and insurance companies . for example , a stable value fund may hold highly rated government or corporate debt , asset-backed securities , residential and commercial mortgage-backed securities , and cash equivalents . stable value funds are designed to preserve principal while providing steady , positive returns , and are considered one of the lowest risk investment options offered in 401 ( k ) plans . stable value funds have recently been returning an annualized average of 2.72 % as of october 2014 , higher than the 0.08 % offered by money-market funds , and are offered in 165,000 retirement plans . 
a stable value fund is a type of investment available in 401 (k) plans and other defined contribution plans as well as some 529 or tuition assistance plans. stable value funds are often made available in these plans under a name that intends to describe the nature of the fund (such as capital preservation fund, fixed-interest fund, capital accumulation fund, principal protection fund, guaranteed fund, preservation fund, or income fund among others). they offer principal preservation, predictable returns, and a rate higher than similar options without proportionately increasing risk. the funds are structured in various ways, but in general they are composed of high quality, diversified fixed income portfolios that are protected against interest rate volatility by contracts from banks and insurance companies. for example, a stable value fund may hold highly rated government or corporate debt, asset-backed securities, residential and commercial mortgage-backed securities, and cash equivalents. stable value funds are designed to preserve principal while providing steady, positive returns, and are considered one of the lowest risk investment options offered in 401 (k) plans. stable value funds have recently been returning an annualized average of 2.72% as of october 2014, higher than the 0.08% offered by money-market funds, and are offered in 165,000 retirement plans.
a stable value fund is a type of investment available in 401 (k) plans and other defined contribution plans as well as some 529 or tuition assistance plans. stable value funds are often made available in these plans under a name that intends to describe the nature of the fund (such as capital preservation fund, fixed-interest fund, capital accumulation fund, principal protection fund, guaranteed fund, preservation fund, or income fund among others). they offer principal preservation, predictable returns, and a rate higher than similar options without proportionately increasing risk. the funds are structured in various ways, but in general they are composed of high quality, diversified fixed income portfolios that are protected against interest rate volatility by contracts from banks and insurance companies. for example, a stable value fund may hold highly rated government or corporate debt, asset-backed securities, residential and commercial mortgage-backed securities, and cash equivalents. stable value funds are designed to preserve principal while providing steady, positive returns, and are considered one of the lowest risk investment options offered in 401 (k) plans. stable value funds have recently been returning an annualized average of 2.72% as of october 2014, higher than the 0.08% offered by money-market funds, and are offered in 165,000 retirement plans.