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Home > Library > Stable Times > Volume 3, Issue 4
The quarterly publication of the Stable Value Investment Association
Fourth Quarter 1999 • Volume 3 Issue 4
SVIA Investment & Policy Survey Highlights
By Judy Markland, Landmark Strategies
The Association's third annual
survey of stable value investments and investment policies covers more
than 97,000 plans with assets of $214.5 billion as of year-end 1998. Responding
firms reported stable value asset growth of 10.1% for the year. At 6.35%
compared to the previous year's 6.63%, yields credited on the portfolios
continue to show good stability and rates well above those available on
other DC asset classes offering principal safety and liquidity.
As in previous years, data for
the survey was compiled for funds of four different manager types: individual
funds managed externally, individual funds managed in-house (typically
jumbo funds), commingled funds in bank and investment company pools, and
commingled funds in life company full-service plans (invested in general
or separate accounts of the life company). This format not only expedites
data collection but allows comparisons of investment management styles
across various segments of the industry.
| Comparison by Type of Stable Value Fund, 12/31/98
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Individually Managed
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Commingled
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|
|
Total
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External
Mgmt.
|
In-house
Mgmt.
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Bank and
Invest Co.
Pools
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Life Co.
Full
Service
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| SV assets (billion) |
$214.5 |
$106.3 |
$19.0 |
$40.7a |
$48.5 |
| Average fund size (million) |
$1.8 |
$254.9 |
$1,055.7 |
$3.6 |
$0.5 |
| SV assets as % of plan assets |
19.5% |
14.8% |
27.8% |
N/A |
26.5% |
| Blended rate (net, %) |
6.35% |
6.41% |
6.74% |
6.22% |
6.21% |
| Modified duration (yrs.) |
2.8 |
2.3 |
3.2 |
2.4 |
3.7 |
| Credit qualityb |
3.2 |
2.7 |
3.4 |
3.0 |
4.5c |
a DC assets only.
b where 1=govts. and agencies, 2=AAA, 3=AA+, etc.
c issuer quality
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The following are
some of the 1999 survey's key findings for the asset class:
- Overall credit
quality for stable value funds is AA+.
- Average fund sizes
in the survey ranged from $1.1 billion for the jumbo funds managed in-house
to $0.5 million for life company full service Stable value funds. Stable
value is well represented in all size segments of the DC market.
- Stable value funds
were 19.5% of plan assets at year-end 1998, compared to 21.0% the previous
year. Stable value funds were 14.8%, 27.8% and 26.5% respectively for
externally managed, internally managed and life company full service
segments.
- General account
GICs constituted 48 %% of the fund portfolios, with synthetics at 41
% and separate account GICs 3 % (see graph).
- Externally managed
individual funds have 12.1 stable value issuers on average, while in-house
funds have 13.4 and pools 20.4.
- Non-participating
contracts comprised 35.2% of stable value fund portfolios at year-end
1998; fully 49.4% of the investments in stable value portfolios participate
in gains and losses from changes in asset values and net participant
withdrawals. These gains and losses are smoothed over time to ensure
the fund's principal stability.
- New investment
volume for stable value portfolios totaled $46 billion during 1998.
With a lower level of market interest rates during the year, yields
on stable value placements fell to 6.13% from 6.55% in 1997.
Read Next: Tracking Stable Value Yield Spreads
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