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Home > Library > Stable Times > Volume 4, Issue 1  The quarterly publication of the Stable Value Investment Association First Quarter 2000 • Volume 4 Issue 1 New Evaluation Tools Available to Stable Value InvestorsBy Janet Jasin Quarberg, Hueler Companies Stable value investors now have access to a new performance measurement and portfolio evaluation tools, with Hueler Companies' new "Separate Account" Stable Value Performance Index and Aggregate Industry Reports. Hueler has developed a comprehensive database of Stable Value information and has constructed an empirical return series that encompasses actual portfolio returns and investment strategies of close to 300 separately managed stable value funds. Hueler's new Performance Index is different from other available indices, as it is not a theoretical portfolio constructed from illustrative GIC rates, but rather actual portfolio returns from several hundred Stable Value Funds. These funds employ a variety of sophisticated investment strategies and buy from a full spectrum of available stable value products. The Index is the (non-dollar weighted) average return of separately managed stable value funds provided from 16 investment managers and individual plan sponsors with stable value asset totaling approximately $75 billion. The index has an average credit of Aa1/AA, an average duration of 2.43 years, and the average Stable Value fund size is $257 million. All return numbers have been carefully compiled on a consistent basis and are gross of stable value manager fees and net of contract or product fees. In the past, the average of the Deutsche (formerly the Bankers Trust Index) 3 year and 5 year Indices has commonly been used in the industry as an indicator of return. The return of Hueler Stable Value Index shows a consistent pattern of return as the Deutsche Index, but at slightly higher levels as shown in the charts below.   On a three, five and ten year annualized basis, the Deutsche index has yielded a 6.47%, 6.51% and a 7.27% respectively and the Hueler Index has yielded a 6.51%, 6.64% and a 7.47%. The new Hueler Performance Index also shows very favorably when compared with the indices of other traditional fixed investment alternatives as shown in the chart below.  On a three-year annualized basis as of 12/31/99, the Hueler Stable Value Index returned 6.51% while Money Markets returned 5.28% and Intermediate Bonds returned 5.47%. On a five-year basis, Stable Value and Money Markets had the same standard deviation, but Stable Value offered over 125 basis points more in return. Intermediate bonds on the other hand, provided just over 40 basis points of additional return over Stable Value, but with almost 25 times more volatility as noted in the standard deviations in the table found above. The Hueler Index data shows that Stable Value continues to provide very strong risk adjusted return relative to all its peers. The following investment managers and individual plan sponsors are committed contributors to the Index and we hope to continue to bring on new participants each quarter. American Express, Bell Atlantic, Certus Asset Advisors, Deutsche Asset Management, Dwight Asset Management, Dupont, Eli Lily, Fidelity Investments, Galliard Capital Management, Halliburton, IBM, Merrill Lynch, Putnam Investments, State Street Global Advisors, T. Rowe Price Stable Value Asset Management, and the Vanguard Group. In the coming months, Hueler will be working with these managers to develop data subsets and criteria for relevant composites. Using manager input, Hueler will create standard composites that will be made available to the market on a regular basis and will also create custom composites upon request. In addition, Hueler will begin a new series of aggregate reports profiling purchase activity. These reports will highlight quarterly placement volume, contract type allocations and maturity selections. Hueler Companies currently produces a package of 25 aggregate reports covering the following key market statistics and plan characteristics: performance, maturity, quality, variability of return, cash flow, fund size, investment option allocation, asset class distribution, withdrawal methodology, transfer frequency and restriction provisions. Whether you are looking to benchmark a portfolio or communicate to management, participants, or outside professionals, the new Stable Value Performance Index and Aggregate Market Reports can be used to significantly improve the process. This new data also provides managers, plan sponsors, consultants and issuers with the tools necessary to more effectively communicate the positive attributes of stable value investments relative to other fixed income options and to better articulate the role stable value should play in the asset allocation decision process.
Read Next: Performance Measurement Task Force Update
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