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How to Evaluate and Monitor Stable Value Investments

Understanding the differences among stable value products is vital to prudent analysis and monitoring of a plan’s stable value option. The appropriateness of a stable value investment is ultimately judged by its ability to deliver safety, liquidity and return to plan participants while consistently meeting the fund’s stated objectives.

Due Diligence Checklist

Review contract and product features

Plan sponsors need a clear understanding of the contract and product features prior to selection of a stable value fund. Understanding the different stable value products and contractual terms is vital for the appropriate analysis and selection of the plan’s stable value option.

Take a closer look at the portfolio

Conduct past and current performance evaluations, understand the risk management in place, and determine the ability and experience of the portfolio manager in managing assets for a stable value program. Ensure that the goals, objectives and structure of the portfolio are clearly defined and followed under the investment guidelines. Assess the commitment of the provider to the stable value marketplace.

Evaluate underlying assets

Conduct an in-depth analysis, review and valuation of the underlying investments, including credit quality, asset allocation, risk and fund performance evaluation. Obtain a full understanding of the risk/reward characteristics that will result in any variance between the market value and book value of the fund.

Review the wrap provider or guarantor structure

Conduct a complete review of the wrap structure, including creditworthiness of wrap providers, wrap capacity for the fund and wrap limitations. Additionally, review wrap issuer investment guideline changes, crediting rate methodology, exceptions to stable value guarantees, withdrawal restrictions, contract termination provisions, issuer financial strength and commitment to the stable value marketplace.

Look for transparency of fees and expenses

Full disclosure of the fund, including fees and expenses, is an important factor as part of a fiduciary review in determining the efficiency and prudence of the plan’s stable value option.

Understand termination options

Obtain a clear understanding of any withdrawal restrictions related to a plan sponsor’s ability to terminate the stable value fund, including any surrender fees, penalties, book value payout delays or market value adjustments.

Look for fund portability

It is important to ensure the fund is fully portable to recordkeeping platforms in the marketplace. Fiduciaries need to obtain a list of outside recordkeeping platforms where the stable value option is approved and traded.

Establish a fiduciary oversight policy

Establish a policy that ensures the oversight and monitoring of the stable value portfolio that includes monitoring the creditworthiness of the wrap issuers, ongoing performance evaluation, quarterly investment overview with the portfolio team and monthly market-to-book ratio analysis.

Mitigate Fiduciary Risk

We can assist you and your clients with the evaluation and analysis of options, costs, fiduciary implications and other considerations for a stable value investment decision.

Stable Value 101

From crediting rates to exit provisions, we cover the basics of stable value fund investing in a format you can share with clients.

Common Questions About Our Stable Value Funds

Looking for more detail on stable value funds from The Standard? See our responses to questions from advisors and plan sponsors. 

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