By Randy Myers
Stable value funds took on a fresh shine in early 2025 after tariffs imposed by the Trump administration sent the stock market into a tailspin. Eager for a safe haven, some retirement plan participants shifted money out of equities and into stable value, where they could take advantage of the asset class’s principal guarantees and more predictable returns.
“In the first two weeks of March, 40% of all reallocations were going into … stable value,” Kostas Sophias, managing director and head of stable value and BOLI/COLI at JPMorgan Chase Bank, told participants at the 2025 SVIA Spring Seminar.
Oliver Meng, acting head of fixed income at MissionSquare Retirement, noted that cash flows into stable value funds spiked again in early April after President Trump announced a new round of “retaliatory” tariffs in addition to other tariffs he’d already imposed earlier in the year (which were then followed by counter tariffs imposed by China). Meng estimated that as much as half of the money pulled out of equity funds went into stable value funds, with the remainder largely split between bond funds and money market funds.
Sophias and Meng were among five members of the stable value community participating in a panel discussion about current trends in the industry during the Spring Seminar held April 14-16 in New Orleans. They were joined by moderator Ben Soltsov, vice president and stable value portfolio manager at Goldman Sachs Asset Management; Samuel Kaplan, managing director and portfolio manager at Jennison Associates; and Aziz Syed, senior vice president, stable value solutions at Athene, the retirement services arm of part of alternative-asset manager Apollo Global Management.
The panel members agreed that financial market volatility and its impact on stable value cash flows and performance have dominated discussions with retirement plan sponsors, advisors and consultants in early 2025. They said their clients also are keenly interested in what stable value managers expect from the financial markets moving forward.
Amid the market turmoil, Soltsov said, Goldman Sachs Asset Management has continued to counsel its clients on the long-term benefits of stable value, which over longer time periods has typically outperformed its principal competitor—money market funds—without subjecting investors to greater volatility. It’s been especially important to reiterate that long-term value proposition over the last couple of years, Soltsov suggested, as yields on money market funds have generally outpaced stable value returns during that period as a result of a sharp uptick in short-term interest rates engineered by the Federal Reserve in 2022 and 2023.
That short-term performance disparity between stable value and money market funds may be destined to disappear soon, however. The panel participants noted that as the Fed reversed course in 2024 and pushed down short-term interest rates, it effectively pushed down money market yields, too, bringing returns on the two asset classes closer to parity. In addition, stable value crediting rates have been moving higher since the summer of 2024 as stable value managers, who invest farther out on the yield curve than money market funds, have been able to replace older, low-yielding debt in their investment portfolios with newer, higher-yielding securities.
What’s more, the Federal Reserve is widely expected to ratchet short-term rates lower still later this year in a bid to stave off the recessionary impacts of the tariff wars. Assuming the Fed does that, money market returns will likely fall still more—and faster than stable value crediting rates—making stable value all the more attractive in comparison to its competitor.
In assessing the outlook for the financial markets, Kaplan predicted ongoing volatility and uncertainty with potentially negative implications for consumer spending, especially among the wealthiest 10% of consumers who were increasing their spending most in 2024. The uncertain economic outlook also could lead employers to cut jobs. While there’s no uniform conviction that a recession is inevitable, Syed remarked that “everybody is getting ready for a recession.”
Economists and analysts seeking clues to where the financial markets are headed have been particularly focused on the behavior of the U.S. Treasury bond market, where there are concerns that foreign governments could begin to shy away from holding U.S. debt. Solstov said, though, his firm hasn’t seen a lot of selling by foreign buyers thus far. He also predicted the Fed will do whatever is necessary to ensure the Treasury market doesn’t freeze up.
Meng added that his firm hasn’t seen panic buying or selling in the bond market, either. He predicted that short-term bond yields will continue to drop, however, resulting in a steepening of the yield curve. Actual cuts in short-term rates by the Fed, Kaplan added, may come later than some investors are expecting, but in bigger increments.
Despite the challenging environment, most of the panelists saw this as a moment of opportunity for the stable value industry as crediting rates move closer to money market yields and nervous investors direct more of their assets into the asset class. Syed—and others—also noted that the stable value industry has opportunities to expand its presence beyond traditional applications in 401(k) plans, including areas such as retirement income solutions, 529 college savings plans, and even, potentially, markets outside the U.S. They also remained optimistic that federal law ultimately will be revised to permit the use of collective investment trusts—including those structured as stable value funds—in 403(b) retirement savings plans. And, Sophias noted, the industry should continue to benefit from bipartisan support in Congress for helping Americans save for retirement.
In the meantime, stable value providers continue to refine their products—and their message to potential clients—in more subtle ways. Some, Kaplan said, have been creating custom stable value benchmarks that more accurately reflect the objectives of the asset class, eschewing more common standards like an intermediate government/credit index. MissionSquare Retirement, Meng said, is considering whether it might be appropriate to add some passively managed fixed income mandates to their stable value investment portfolios. And Syed said that Athene, which only recently entered the stable value marketplace, is making the case to include investment-grade private investments in defined contribution plan assets as it explores new ways to deliver guaranteed income to investors.
