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Home > Library > Stable Times > Volume 3, Issue 1  The quarterly publication of the Stable Value Investment Association First Quarter 1999 • Volume 3 Issue 1 New Investment Advice Models Exclude Stable ValueBy Janet Jasin Quarberg, Hueler Companies With the shift in assets from defined benefit to defined contribution plans over the past years, today more and more plan sponsors are looking for ways to give plan participants better investment guidance. Three firms, Trust Company of the West, State Street Global Advisors partnering with Financial Engines, and 401(k) Forum are entering the "investment advice" business. Only the Trust Company of the West product required and received a DOL exemption. Many others such as Paine Webber and Merrill Lynch are soon to follow. While there is a real need for sound investment advice, none of the organizations mentioned above include stable value in their asset allocation model, and yet interestingly, money market and bonds are included. According to a 1998 BARRA Rogers Casey/IOMA DC Survey of 455 plans, approximately 65% of plans currently offer a Stable Value Fund, with an average asset allocation of 22%, making Stable Value the third largest fund option for most plans. Money markets represent 1.2% and bonds represent 1.8% of assets. Disregarding a large asset class like stable value seriously diminishes the value of the entire investment advice service. To exclude stable value funds from the advice model is a serious disservice to plan participants. Stable value can offer participants 1.5%-2% higher annualized return than money market funds and over a five year period ending 12/31/98, has offered comparable returns of an intermediate bond fund with 45 times less volatility.
The stable value community needs to challenge these organizations' position using proven statistics in a united effort to have stable value accurately represented in these models. SVIA has formed a task force led by Stephen LeLaurin from PRIMCO to address these issues. The task force is finalizing a white paper, which will be used to present stable value to as many asset allocation organizations as possible. The task force is also in the process of compiling a comprehensive list of asset allocation vendors. You can help accelerate SVIA's efforts by contributing investment advice model contacts and the status of the model and whether it includes stable value. Please email information to stevel@primco.com to help move this critical initiative forward.
Read Next: Funding Agreements in Money Market Funds
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