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SVIA Adopts Key Investment Principles to Increase Understanding of Stable Value Funds

For more than 30 years, stable value funds have played a fundamental role in helping retirement plan participants safely accumulate retirement savings. Stable value funds have long been considered one of three core investment options, along with equities and company stock. See Power Point Chart for SV is Core Investment Option

According to SVIA's latest survey, over 110,000 defined contribution plans make stable value available to the more than 25 million participants who have invested $413 billion in the conservative investment option.

While stable value funds have a long and steady history in 401(k) plans, confusion about stable value still exits on various fronts. That is why the SVIA's Board of Directors over the course of a year and a half, and in consultation with the association's broad membership, developed Key Principles for Stable value funds. Key Principles provides a quick primer on the basics of stable value funds and outlines broadly the key principles of prudent stable value investment management. It covers:

• The objectives of a stable value fund,
• How 'stable value' is achieved through guaranteed interest contracts (GICS) and wrapped diversified bond portfolios,
• Characteristics of a stable value portfolio, such as credit quality and currency exposure, portfolio diversification, duration, liquidity and the use of derivatives,
• The primary formats for stable value: separately managed accounts, commingled funds and directly guaranteed funds.
• The regulatory structure for stable value funds.

While Key Principles provides a general guide for stable value funds, it also recognizes the diversity of stable value funds and the fact that plan participants benefit from the many different formats and investment strategies used by stable value funds. Importantly, as the paper says, "the appropriateness of a stable value strategy is judged by its ability to deliver safety, liquidity, and return to the plan participants it serves in a manner that consistently meets the stable value fund's stated objectives."

To learn more about Key Principles, please go to SVIA's website, www.stablevalue.org.

Read Next: SVIA Eleventh Annual Survey Highlights Investment Policy Covering $413 Billion in Stable Value Funds