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Stable Value Survey Shows Consistent Performer With Consistent Results

SVIA's Eighth Annual Investment and Policy Survey reported on $355 billion in assets from 110,184 defined contribution plans as of December 31, 2003. Looking at consistent responses for both 2003 and 2002, stable value assets grew by 6.6 percent in 2003. While quite respectable, this reduction in the growth rate of stable value assets reflects the end of the equity bear market, which caused many participants to reduce equity allocations in favor of stable value during the prior two years.

Stable value returns continued to significantly outperform money market returns, despite declining with interest rates. Returns on stable value funds were 4.93 percent in 2003 compared to 5.84 percent in the previous year. Participant allocations to stable value were strong, averaging 31.7 percent of 401(k) plan asset in 2003. Participant allocation was down slightly from 34.8 percent in 2002 on a consistent response basis.

Wrapped assets were 66 percent of stable value portfolios in 2003, compared to 59 percent in 2002.  GICs declined from 34.6 percent in 2002 to 28 percent in 2003. The remaining assets included three percent cash and one percent other.  The use of global wraps continued to expand in 2003, with 39 percent of respondents reporting using global wraps, which compares to 31 percent in 2002.  As the Wrapped Assets Underlying Portfolio Graph demonstrates small adjustments were made in asset composition between 2003 and 2002.

Interestingly, duration rose in 2003 to three years, compared to 2.8 years in 2002.  Credit quality also increased in 2003 to 8.8 (AA/Aa and better) for both S&P and Moody's ratings, which compares to 8.7 and 8.4 respectively for 2002.

To learn more about SVIA's Eighth Annual Survey and individual market segments, please go to SVIA's website (www.stablevalue.org) and visit Members' Only for the full annual report.   Otherwise, look forward to future articles in Stable Times.

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