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

SVIA's Eleventh Annual Stable Value Fund Investment and Policy Survey provides an overview of how $413 billion in stable value funds are managed for more than 110,000 plans covered in the survey. The survey takes a broad look at the major components of stable value fund investments covering the four major investment management sectors: external investment management, in-house management by a plan sponsor, bank and investment commingled pools, and life company full service.

Here are just a few highlights:

• The distribution of assets among management segments changed slightly: external management represented 46 percent; pooled funds, 29 percent; life company full service, 22 percent; and in-house, 3 percent. The 2005 distribution was external management, 44 percent; pooled funds, 31 percent; life company full service, 22 percent; and in-house, 3 percent. Click Here to See Highlights.
• Assets grew slightly, from $397 in 2005 to $413 billion in 2006, despite a decline in survey participation in the in-house and life company full service segments.
• The overall net return for stable value funds rose to 4.54 percent in 2006, from 4.44 percent in 2005. All management segments reported modest increases in net returns compared to 2005, as the graph illustrates.
• Credit quality remained relatively unchanged, with survey participants reporting AA or better on average, using both S&P and Moody ratings.
• Average duration shortened in 2006 to 3.18 years from the previous year's 3.28. While all management segments reported shorter durations in 2006, bank and investment companies reported the shortest average duration of 2.76, with external managers at 2.95. Life company full service had an average duration of 4.09, while in-house was 4.17 years.

While the product allocation continued to vary widely based on manager segments, the survey found the overall average allocation in 2006 for stable value contracts was 3 percent to cash, 29 percent to GICs and general account products, and 67 percent to wrapped assets. When comparing 2006 and 2005 allocations, modest increases in allocations to cash and GICs and general account products are found. Additionally, the use of global wraps increased to almost 61 percent in 2006 compared to 51 percent in 2005. Modest changes occurred in the underlying portfolios of global wraps with slight increases in allocations to cash, treasuries, asset-backed securities, and commercial mortgage-backed securities, with slight decreases in allocations for the other asset allocation categories. Click Here to See Highlights.

Slight changes in contract risk participation were found in 2006. Allocations to non-participating contracts grew to 17.8 percent from 15.5 percent in 2005. Similarly, contract participation for asset experience only grew from 2.61 percent to 3.53 percent. Allocations to contract participation for all experience declined slightly to 68.33 percent from the previous year's 69.33 percent. Hybrid contracts decreased to 10.34 percent, compared to the previous year's 11.81 percent. Click Here to See Highlights. SVIA 11th Annual Stable Value Investment & Policy Survey

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