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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 Editor's CornerBy Wendy Cupps, PIMCO The recent turbulence in the stock market provides a reminder of the importance of good asset class diversification. This is where stable value can serve an important role. Research shows that most of the stock market's action happens during only a few turbulent periods, and the rest of the time the market meanders making little net progress. The key then to investment success is to have the right portfolio during the frantic period when the market produces most of its net gains or losses. During turbulent, down markets, like we've experienced recently, stable value returns cushion 401k portfolios against stock losses. With its attractive risk-adjusted returns, stable value is an excellent diversifier. We've certainly seen that stable value is getting more attention in this environment. Many industry providers and fund sponsors are faced with the welcome task of investing new cash flows. It's funny that our industry thrives on equity market woes, particularly when we want equities to do well in our personal portfolios. But it is nice to see some recognition of the important benefits that stable value can provide, and it gives us incentive to continue to promote the benefits of stable value to a broader universe. As part of these efforts, this edition of the Stable Value Times provides interesting insights on developments in our industry. A recent SVIA Board of Directors vote supported the Performance Measurement Task Force's market value approach as the best for evaluating stable value manager performance, and affirmed that further dialogue with AIMR on implementation and compliance issues should be pursued. Chris Cutler from Deutsche Bank continues the dialogue on asset allocation models, explaining different approaches for valuing stable value and the importance of ensuring that the models "get it right." Two new opportunities for stable value are discussed: Aruna Hobbs of Aegon describes the prospects for stable value investments in 529 College Savings Plans, and Rob McCormish of Certus Asset Advisors talks about their efforts to export stable value to Japan. We are fortunate to have an article from Congressman Rob Portman (R-OH) highlighting his legislation for expansion and reform of pension laws. Additionally, we have another article focusing on Washington developments regarding the Department of Labor's recent guidance on plan expenses from Donald Myers and Michael Richman of Reed Smith and Shaw. Also included is a discussion on the fee advantages provided by institutionally priced funds, a look at the impact that the shrinking Treasury market may have on our industry, an update on 5500 reporting requirements for master trust stable value funds, and updated data from Hueler on stable value purchases trends. Now IS a good time for investors to focus on risk tolerance and asset allocation, and Gina Mitchell at SVIA highlights a new tutorial on the SVIA website that is designed to help explain the contribution that stable value makes in a retirement portfolio. While the story can be difficult to get across amongst the proliferation of material promoting equities, the current weakness in the equity market provides an opportunity to get our message out to participants because we have their attention.
Read Next: Beyond Luck: Stable Value, Diversification & the New Lesson
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