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Immediate Release
August 15, 2002

Looking for Consistent & Predictable Returns As Equities Slide and 401(k) Balances Decline? That's Why 401(k) Investors Turn to Stable Value

August 15, 2002… Why are defined contribution retirement plan investors moving assets from equity into Stable Value Funds? They are looking for consistent and predictable returns in uncertain times.

"Stable Value returns of 5.9% looks pretty attractive compared to other asset classes," says Stable Value Investment Association President, Gina Mitchell. However, compare Stable Value's returns as of July 31, to the S&P 500's - 7.8%, NASDAQ's -9.2%, the Dow Jones IA 30's -5.35%, the Russell 2000's -15.1%, or the Lehman Aggregate's 1.21% and you get a fuller picture of why 401(k) investors have rediscovered Stable Value Funds. In fact, Stable Value Fund assets grew by 19% in 2001.

The Hewitt Index ^TM, which tracks market confidence and investment activity of 1.4 million 401(k) participants with $62 billion in assets on a monthly basis, found July to be the most active month yet this year for transferring assets. Seventy-three percent of July's cash flows moved out of equity assets and 44% of cash flows were directed into Stable Value Funds in respond to increased market volatility and a barrage of corporate accounting irregularities.

Stable Value Funds offer the best complement to equities because they are less volatile than other fixed income options such as intermediate bonds and money market funds, and their returns exceed money market rates by 100 to 250 basis points. In fact, Stable Value Fund returns have beaten money market funds by at least 125 basis points for the past five years.

Stable Value's higher returns, compared to money market funds translate into significant earnings for 401(k) investors. To illustrate, a $1,000 investment in Stable Value over the past 10 years would have grown to $1,883 compared to $1,581 invested in a money market fund, providing a 19% premium to the investor.

"Stable Value combines the best features of bonds and short-term investments: the liquidity and safety of a money market fund plus the higher returns of intermediate bonds," stresses Mitchell. Using Stable Value instead of money market or bond funds in an investor's asset allocation mix can actually increase expected returns without increasing risk.

"Investors do not seem to understand the inverse relationship between interest rates and bond prices. That's why stable value is so appealing. A Stable Value investor knows exactly what to expect-preservation of principal and accumulated earnings," adds Mitchell.

Stable Value fees and expenses are typically less than most conservative funds. In August, DC Plan Investing reported Stable Value fees averaged 41 basis points compared to 56 basis points for bond funds and 49 basis points for money market funds.

Stable Value funds are fixed income portfolios that invest in a combination of high-quality bonds and investment contracts issued by insurance companies and banks. Unlike bond funds, Stable Value investors are shielded from price fluctuation and their accounts rarely lose value.

Stable Value Funds, sometimes called interest income funds or principal stability funds, can be found in almost a quarter of all 401(k) plans and now IRA mutual funds and 529 tuition assistance plans. Currently, 401(k) investors have over $261 billion invested in stable value funds.

With the outstanding diversification and flexibility available from today's Stable Value investments, defined contribution plan investors should ensure they have a solid "Stable Value" solution. See the SVIA website for illustrations (www.stablevalueillustrations.org) of the role Stable Value can play in a defined contribution plan.

SVIA is a non-profit organization dedicated to educating the public on the importance of saving and investing for retirement and the contribution that Stable Value can make in providing for a financially secure retirement.