New research from Prudential predicts expansion of stable value market

Growing numbers of plan sponsors and intermediaries may be open to embracing stable value in the coming years, according to a new white paper released today by Prudential Retirement, a business unit of Prudential Financial, Inc. (NYSE: PRU). Favorable perceptions of stable value among plan sponsors and intermediaries coupled with the changing regulatory environment for money market funds could boost demand for stable value funds.

The white paper, “Expanding the Case for Stable Value,” is based on the survey of 400 plan sponsors and 300 intermediaries, which identified the factors that motivated them to adopt stable value and recommend the asset class to others. Plan sponsors and intermediaries that had not yet embraced stable value were also asked to identify the barriers to adoption. The survey revealed a number of key findings:

  • the top two reasons for stable value adoption were capital preservation and steady returns
  • 54 percent of plan sponsors and 75 percent of intermediaries cited capital preservation as their main reason for adoption
  • 54 percent of plan sponsors and 70 percent of intermediaries cited steady returns as a deciding factor in adoption
  • stable value recommendations were primarily based on three factors: 1) the returns the asset class delivered versus other fixed-income investments 2) their role in boosting plan participation and deferral rates, and, 3) for the intermediaries, their liquidity for participants.
  • non-adoption of stable value stemmed mainly from three factors: 1) perceptions about cost 2) their performance relative to equities and other non-fixed income asset classes, and 3) the notion that they may be difficult for plan participants to understand
  • 53 percent of plan sponsors and 69 percent of intermediaries saw the cost of stable value funds as a challenge.

The white paper also points out that another reason for non-adoption might be that stable value is less well known than other investment options, including money market funds and mutual funds—and familiarity is a key driver of acceptance for most investment products in the marketplace.


Click here to read Prudential’s press release.