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Home > Library > Stable Times > Volume 3, Issue 3  The quarterly publication of the Stable Value Investment Association Third Quarter 1999 • Volume 3 Issue 3 Growth Predicted in the "Stable Value Investing GICs'99" SurveyBy Greg McGreevey, ING Institutional Markets Introduction At the 13th Annual Symposium on Stable Value Investing, GICs '99, certain attendees provided their input to a survey that covered a number of key issues within this industry. This article provides a brief overview regarding the responses we received as well as some commentary regarding these results. Responses were received from over 30% of the 350 plus attendees at the conference. We have grouped these responses into three categories in order to provide more consistency between the various survey questions:
Growth of the Markets Stable Value Market The first five questions of the survey dealt with individuals' growth expectations in a number of key markets within the broadly defined stable value industry. The first question related to the total expected growth in the 401(k) market and the expected percentage allocated to stable value funds. 96% of respondents felt that total assets in the 401(k) market would grow at an average annual growth rate of 5% or greater, with over two-thirds of respondents believing that such annual growth would be at or above 10%. Over 80% of the survey responses indicated that stable value would capture at least 15% of the total 401(k) assets, with about half believing this percentage would be at least 20% or greater. Graph: 401(k) Market Size
Graph: 401(k) Market Size - Stable Value Percentage
IRA Market (Qualified) The second question dealt with expected growth in the IRA market, a potential new market for stable value managers. 99% of those surveyed felt that this market would grow at least at an annual average rate of 5% over the next five years. It appears that total respondents based their opinions on the aging domestic population base. When it came to how much of this market would be allocated to stable value, respondents were less optimistic when compared to responses in the 401(k) market. Specifically, nearly three-quarters of those providing responses felt that stable value would capture 10% or less of this sector's assets within the next five years. These numbers are most certainly reflecting the time it takes to build brand name recognition and distribution into the new market segment, stable value retail mutual funds. Graph: IRA Market Size
Graph: IRA Market Size - Stable Value Percentage
The third question moved into the qualified international marketplace by obtaining responses to expected growth in the global DC market by April 2004. As many readers know, many foreign countries have begun to move away from country- or employer-based benefit plans in favor of 401(k)-like plans. The responses to this question were somewhat mixed, with a bias toward favorable growth. Specifically, roughly two-thirds of respondents believed that the global defined contribution market would provide excellent or good growth opportunities for stable value players, with the remaining respondents believing that growth in this sector would be only fair or poor. Graph: Global DC Markets - Growth Opportunities
Domestic Funding Agreement Market (Non-Qualified) The fourth question on the survey related to the domestic non-qualified market, which has contributed to a large percentage of insurance companies' growth in recent years. The domestic funding agreement market was created within the last eight years to enjoy total annual sales that are almost equivalent to the entire annual sales in the qualified retirement market for stable value products. Of those that responded, over 90% believed that average annual growth in this market would continue to occur, albeit not at the level experienced in the prior years. 93% of those participating in the survey believed that this market would grow at an average annual rate of 5% or more in the next five years. About 25% of respondents believed such growth would be an average annual growth rate of over 10%. Buyer capacity limitations and rating agency concerns will likely be offset by the new applications for funding agreements in this market for this growth to continue. Graph: Domestic Funding Agreement - Annual Sales Expectations
Finally, the last question within this category had to do with growth in global funding agreement placements over the next five years. Total placements in this market have increased at an extremely rapid rate, with a number of large domestic insurance companies and other entities accessing the capital markets in Europe and Asia. Respondents believed that such growth would continue at a brisk pace, with over 96% of those surveyed believing that average annual growth would be at or above 10%. The current explosion in European medium-term note programs provides strong indication that those participants that responded to this question will probably be correct, at least over the short term. Graph: Global Funding Agreement - Annual Sales Expectations
It is apparent from those that provided responses to the survey of their optimism for potential growth in the stable value market if defined to included both domestic and non-domestic products. While these questions were most relevant to issuers of stable value products in these sectors, such growth also pertains to all players in these market segments. We look forward to continuing our series...
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