Why Stable Value Funds Offer Security in 2019 and Beyond

For retirement plan sponsors and participants seeking guaranteed interest, safety of principal and liquidity, stable value options are a compelling investment. 

 

“Stable value funds have historically offered attractive yields compared to money market funds,” says Jim Roche, Senior Stable Value Director at The Standard. Money market funds hold securities that are typically ultra-short duration or highly liquid fixed-income investments. This makes them very liquid but the returns are very low. According to Roche, the guaranteed feature of stable value can support better participant outcomes. Stable value funds consist of a diversified portfolio of fixed income securities that are insulated from interest rate movements by guaranteed contracts, which provide a known crediting rate and minimum interest floor protection.

 

Stable value funds can offer plan participants peace of mind. “They offer a principal guarantee,” says Joe Bruns, Stable Value Director at The Standard. “For plan participants with retirement on the horizon, this protection can be crucial.” 

 

Stable value funds focus on capital preservation and liquidity that provide steady, positive returns for participants. Regardless of what happens to the markets, plan participants will receive book value — principal and accrued interest — for their investments. 

 

Most stable value funds are fully portable and can be kept as an investment option in the event there is a change in recordkeeper. 

 

Depending on the issuer, a stable value fund’s crediting rate is typically contractually guaranteed and known to participants in advance. “At The Standard, all our stable value funds come with a guaranteed crediting rate,” says Joe Simmons, Stable Value Director. “The promise that the crediting rate will never fall below a stated minimum can be an advantage for plan participants who have been hurt by the financial instability of the marketplace and want a predictable return on investment for their savings.” 

 

Stable value funds have high-quality, well-diversified portfolios of fixed-income instruments. This benefit is often appealing to risk-averse or soon-to-be retiring plan participants who want to achieve more certain returns on their investment. 

 

Stable value investments can be offered by a variety of issuers, so it’s important to evaluate the financial strength of the issuing company. “At The Standard, our full guarantee of principal and interest are backed by Standard Insurance Company,” says Roche.

 

The Standard is a nationwide retirement plan recordkeeper and provider of stable value funds. Our DCIO stable value options offer attractive and competitive guaranteed rates. Many of our funds are approved for qualified and non-qualified retirement plans, including 401(k), 401(a), 403(b), 409(a), all 457 plan types and defined benefit plans. They easily trade through the National Securities Clearing Corporation and are available through major recordkeeping and trading platforms. For rate information, please contact us at SAFQuestions@standard.com.