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SVIA Looks at Changes & What They Mean for the Stable Value Community

The nature of retirement investing has gradually and significantly changed over the past 12 years.  We have moved from an institutional fund platform that tailored funds specifically for defined contribution plan sponsors to a mutual fund supermarket with ready packaged funds.  In 1990, institutional funds held 91% of all 401(k) assets.  Mutual funds held only 9%.   By 2000, things changed:  mutual funds commanded 44% of 401(k) assets and institutional funds held 56%. 

Throughout this evolution, one thing has remained constant: stable value’s core as an investment option.   Stable value has had a significant role in 401(k) plans even when the equity market went in the ozone during the nineties.  Now, it is being rediscovered as the equity market scrambles back and forth like a nervous spider who built his web in the front door to your house.  Stable value has had a constant presence during the investing public’s love-hate relationship with equities.  It has survived the investment education campaigns emphasizing the benefits of a long-term horizon in retirement investing.  It has also survived during a period where participants still believe that stocks will produce double-digit returns, year-in and year-out.  It has even survived the mutual funds’ marketing and sales blitz for direct contact with 401(k) investors.

SVIA’s Sixth Annual Investment and Policy Survey found that investments in stable value had grown by 19% in 2001.  Assets have reached $261 billion, and the survey found the current asset allocation to stable value is 29%, which is a peak over the past five years.

Recognizing the importance of the evolving trends, threats and opportunity in the retirement market, the SVIA formed a Task Force to identify the major issues before the stable value community and to develop a strategic plan for the Association to help the membership deal with these issues.  The Task Force is part of the Membership Committee and is chaired by Pacific Life’s John Milberg. 

The Task Force has drawn representatives from SVIA’s four membership segments:  issuers, managers, plan sponsors and wrappers.  They are listed below. 

Task Force on Mission & Environmental Assessment

• John Milberg, Pacific Life, Chairman
• Jim Aguilar, Principal
• Gary Bacchiocchi, MassMutual
• Peter Bowles, FMC
• Robert Capaldi, Black Rock
• Karen Chong-Wulff, Dupont
• Rick Cook, GE
• Mark Devine, AT&T
• Nat Duffield, Halliburton
• Doris Fritz, Fidelity
• Bruce Goode, Goode Investment Management
• Aruna Hobbs, Aegon
• Henry Kao, UBS AG
• Robert Leary, AIG
• Paul Lohrey, Vanguard
• Marc Magnoli, J.P. Morgan Chase & Company
• James McDevitt, State Street Bank & Trust Company
• John Moroney, Rabobank International
• Ken Quann, New York Life
• Steve Schaefer, Allstate
• Kevin Smith, Prudential
• David Starr, Dwight
• Robert Whiteford, Bank of America

Despite their unique vantage points, the task force members have found unanimity in identifying the big picture issues:

• The threat of a sustained period of rising interest rates.

• The affect on investments and withdrawals of the retirement of the baby boomer generation.

• How asset allocation models and financial planners view and treat stable value.

• Market breath and depth of stable value providers.

• The move to a mutual fund format of 401(k) investment options and IRA rollovers.

• Potential limitations or restrictions on investment choice through legislative, regulatory or accounting mandates.

The Task Force is now looking to prioritize the issues and develop a plan for successful resolution in time for the SVIA National Forum, “Navigating Demographics, Market Performance and Individual Choice to Achieve a Financially Secure Retirement,” on October 15-17, 2002. 

Read Next: Assets Grow to $261 Billion in 2001 Reports Stable Value Funds Sixth Annual Investment and Policy Survey