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Home > Library > Stable Times > Volume 5, Issue 1
The quarterly publication of the Stable Value Investment Association
First Quarter 2001 • Volume 5 Issue 1
Performance Measurement Application to Stable Value Managers:
The Next Step in the Dialogue - Talking to AIMR
By Gina Mitchell, Stable Value Investment Association
At the February Board of Directors' meeting, the Association took the next
step in an on-going dialogue that almost dates back to the founding of SVIA.
The topic was applying a framework for performance measurement that enables
evaluation of Stable Value Fund Managers.
Over the years, SVIA had several informal discussions, two Task Forces and
two draft reports to stimulate discussion and consensus. SVIA's Board of
Directors voted 12 to 2 to go the next step and begin a dialogue with the
Association for Investment Management and Research on applying a performance
measurement framework that enables evaluation of Stable Value Fund Managers
and meets AIMR's Performance Presentation Standards (PPS).
Before the Board's February action, the Association received input from
60 out of 110 voting members on moving the discussion to the Association
for Investment Management and Research. Only nine members opposed this step.
The Board's approval finalized the two draft reports, which have been renamed
to clarify their focus (Phase I and Phase II, respectively, of the Task
Force Reports on the Stable Value Manager Comparison Performance Measure.)
The reports will now be used as the basis of a dialogue with AIMR on Stable
Value Funds.
Fundamental to the Board's decision was strong recognition of a need for
consistent disclosure of manager performance within the Stable Value industry.
The Board felt its support of the proposal achieved the key objectives of:
- Increasing the visibility and acceptance of Stable Value as an asset class;
- Making Stable Value more comparable to other fixed income alternatives;
- Improving plan sponsors' and consultants' ability to evaluate performance among Stable Value Managers.
AIMR's expertise and
experience makes it the best authority to discuss application issues raised
when a performance standard is applied to Stable Value. Two developments
within the Investment Performance Council (IPC) of AIMR? the group responsible
for developing, promulgating, administering and promoting AIMR's activities?
made the timing of this dialogue fortuitious. They are the discussions on
how to develop the AIMR-PPS? in view of there being a Global Investment
Performance Standard (GIPS), and the continued and energetic promulgation
of GIPS itself.
The Board's approval means two things. First, the Association believes
that the Task Force work represents collectively the best approach to
giving plan sponsors performance measurement standards for Stable Value
Fund Managers that can fit within the AIMR-PPS? framework. As such the
Task Force's reports serve as guidance for meeting the AIMR-PPS? requirements
and determining Stable Value Manager performance.
Second, approval permits the Task Force to carry on a dialogue on behalf
of SVIA directly with AIMR on implementation and compliance issues.
The Task Force will focus on issues unique to Stable Value such as the
valuation of GICs and an effective date for presenting compliant performance
results.
The Board's approval did not seek to resolve issues related to valuation
methodologies, composite construction or benchmarks. Additionally, the
Board does not recommend or discourage compliance with AIMR's PPS standards,
which are voluntary by nature. Lastly, market valuation is a tool available
to plan sponsors to evaluate Stable Value Managers' performance. Market
valuation is a complimentary resource to book value, which is the foundation
for Stable Value.
Read Next: Fixed Income Comparison
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