What is a Stable Value Fund? A stable value fund is a conservative low risk performing, while providing some steady, investment option that is similar to a money positive excess return. Though the goal of market fund, but historically has delivered a low risk and less volatility can be achieved higher overall return. (See chart below). with stable value funds, it comes at a cost of Unlike stock funds that seek to maximize lower returns over a market cycle than those return, or fixed income funds that seek a achieved in other asset classes. more modest return with less volatility, stable value funds are designed primarily to preserve capital. In other words, the funds seeks to deliver “Stable Value” and to retain the full value of your invested cash, regardless of how the stock or bond markets are Through the end of 2016, over $780 billion was invested in stable value funds. Approximately half of all DC retirement plans in the US offer a stable value fund as an investment choice. The low risk nature of this type of investment can help provide investors’ portfolios with diversification and downside protection in their overall asset allocation strategy. Though many retirement plan participants appreciate the reduction in risk stable value funds offer, they are not the best choice for all investors. Younger investors especially, who are seeking long-term capital appreciation, require a high allocation to equities to generate the level of growth needed in their investments to achieve their retirement goals. For these investors, stable value funds typically are not the best alternative. However, the principal preservation feature of stable value funds may be more attractive to retirees, who cannot risk much portfolio volatility, since their ability to recover portfolio losses is limited. The role of the Wrap Along with investments in fixed income securities, stable value funds also purchase wrap contracts or "wrappers" offered by banks and insurance companies. Wrap contracts generally guarantee a certain principal and minimum interest rate of return, even if the underlying investments decline in value. So they offer even more protection from interest rate volatility than typical bond investments. The principal
What is a Stable Value Fund? A stable value fund is a conservative low risk investment option that is similar to a money market fund, but historically has delivered a higher overall return. (See chart below). Unlike stock funds that seek to maximize return, or fixed income funds that seek a more modest return with less volatility, stable value funds are designed primarily to preserve capital. In other words, the funds seeks to deliver “Stable Value” and to retain the full value of your invested cash, regardless of how the stock or bond markets are performing, while providing some steady, positive excess return. Though the goal of low risk and less volatility can be achieved with stable value funds, it comes at a cost of lower returns over a market cycle than those achieved in other asset classes. Through the end of 2016, over $780 billion was invested in stable value funds. Approximately half of all DC retirement plans in the US offer a stable value fund as an investment choice. The low risk nature of this type of investment can help provide investors’ portfolios with diversification and downside protection in their overall asset allocation strategy. Though many retirement plan participants appreciate the reduction in risk stable value funds offer, they are not the best choice for all investors. Younger investors especially, who are seeking long-term capital appreciation, require a high allocation to equities to generate the level of growth needed in their investments to achieve their retirement goals. For these investors, stable value funds typically are not the best alternative. However, the principal preservation feature of stable value funds may be more attractive to retirees, who cannot risk much portfolio volatility, since their ability to recover portfolio losses is limited. The role of the Wrap Along with investments in fixed income securities, stable value funds also purchase wrap contracts or "wrappers" offered by banks and insurance companies. Wrap contracts generally guarantee a certain principal and minimum interest rate of return, even if the underlying investments decline in value. So they offer even more protection from interest rate volatility than typical bond investments. The principal
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