By Gina Mitchell, SVIA
Defined contribution investors have taken all that the financial markets have thrown at them: an historic market upheaval and a prolonged recession in a low-interest rate environment with increased volatility. Unlike most investors, defined contribution investors have an investment that has withstood the market’s battering: stable value. And, according to SVIA’s Stable Value Quarterly Characteristics Survey that was launched in the last quarter of 2008, these investors have found refuge from the market’s storms with stable value.
The Characteristics Survey tracks key factors such as assets under management for 27 stable value managers. The survey shows that at the height of the crisis, investors placed $347 billion in stable value funds. Assets under management increased from 2.5 percent to 9 percent over the next five quarters. Assets under management declined only once, in March 2009 by less than one percent. Assets grew over the time frame of the survey from the $347 billion in December of 2008 to $440 billion as of March 2010.
The survey demonstrates the increasing importance of stable value to investors and shows why they use stable value as a cornerstone in their asset allocation. No other investment offers stable value’s unique combination of characteristics: capital preservation and a steady, consistent return. Combine these characteristics with stable value’s ability to blunt the overall risk of a 401(k) investor’s other allocations to higher risk assets like stocks and bonds, and it becomes very apparent why investors are increasingly choosing stable value as their fixed income choice.
See Stable Value Funds Continue To Be a Valued Investment Chart: