Stable Value Is Always in Season

When’s the right time for stable value investing in a retirement plan?

The answer depends on the direction interest rates are going and the duration of the investment.

Both money market funds and stable value funds are designed to offer low risk and protect the principal, and they’re subject to interest, credit and liquidity risk. But these two options vary significantly in terms of returns, volatility, suitability for different market conditions and risk factors.¹

The choice between money market funds and stable value funds depends on your unique needs. If you take a long-term view and anticipate a decline in interest rates, then a stable value portfolio may be a more attractive investment option for your clients compared to a money market fund.

Here’s why:

Stable value funds have historically outperformed money market funds.

Recent interest rate volatility has temporarily made money market funds look more attractive. However, money market funds have outperformed stable value funds only during periods of rapidly rising rates. Even then, there have been only two periods in the past 30 years when average money market fund yields approached those of stable value funds.²

With interest rates expected to decline, the yield difference between these two types of investments has narrowed.

As rates decline, stable value funds represent a compelling alternative to money market funds, whose yields closely follow the federal funds rate.

With their longer maturities, stable value funds offer better returns and more stability for retirement plan sponsors, compared with money market funds. They are more consistent and less volatile, making them a more suitable option for people close to retirement.

So when is the right time for stable value investing? The answer is: Stable value is always in season.³

Learn more by exploring cash-equivalent investment options in a volatile rate environment. Contact one of our stable value experts for more ways to help your clients make investment decisions.

For financial professionals; not intended for consumers.