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How IBM And Its Employees Use Stable Value

Participants at IBM use their stable value fund to preserve assets and earn a guaranteed return as they approach retirement.

"It's about 50 percent evergreen and about 50 percent maturing assets," says K. Daniel Libby, CFA, and Investment Manager for IBM's $3.6 billion stable value fund. "The thing about the stable value fund is that it's always positive."

Roughly 50 percent of the participants in the stable value fund are receiving bridge benefits or are retired. The other half are active. The average age is 55. Roughly half of the portfolio is in guaranteed investment contracts and the rest is in bonds.

"The way we set up the portfolio was by looking at the demographics of the participants," Libby says. For the year prior to September 30, the stable value fund returned 6.45 percent.

IBM's $15.0-billion, Tax Deferred Savings Plan , the company's 401(k) plan, offers 206,000 active and retired participants eleven investment options including the stable value fund.

There are four equity funds, including an IBM stock fund and three index funds for large company, small company and international equities. On the fixed income side, IBM offers a money market fund, currently with $450 million in assets, and an index fund tied to the Lehman Aggregate Bond Index. Only the stable value fund is managed in-house.

"The other funds, because they are all index-based, are managed by an out-of-house manager," Libby says. IBM also offers four life strategy funds that mix assets between the other seven choices.

For the year prior to September 30, the IBM stock fund was up 21.7 percent, the small company and international stock funds were down 11.9 and 13.1 percent, respectively, and the large company index fund was up 11.3 percent. For the same period, the bond fund and money market fund were up 11.3 and 5.6 percent, respectively.

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