Stable Value Assets Continue to Grow in 2012

By Randy Myers


The stable value market continued to grow again last year as retirement plan participants continued to show enthusiasm for the steady returns and principal guarantees offered by the asset class.

Assets in stable value funds grew 8.5 percent to $701 billion in 2012 , giving stable value about a 14 percent share of total defined-contribution-plan assets, Jim King, chairman of the Stable Value Investment Association’s board of directors, told participants at the SVIA 2013 Spring Seminar. That increase followed growth of 19.6 percent in 2011, and while it was attributable in part to investment gains, King said that with stable value crediting rates averaging about 2.5 percent last year, more of it came from new contributions to the asset class.

King said it also appeared that more plan sponsors were adding stable value funds to their investment menus. They appreciated stable value’s unique attributes, including principal protection and predictable returns that outpace inflation, when assessing conservative investment options, King said. They also liked the idea that stable value’s predictable returns mean plan participants are less likely to try to engage in market-timing of the sort more volatile investments might encourage. All these factors, he said, are good reasons for plans that offer stable value to continue doing so, and for those that do not to start.

King noted that stable value funds proved particularly attractive during the 2008 credit crisis and its aftermath. Thanks in part to their performance during that stretch, stable value funds returned an average of 6.1 percent annually from 1989 through 2009, outpacing intermediate-term bond funds (5.6 percent), money market funds (3.9 percent) and inflation (3.0 percent).

To encourage further growth in stable value funds, King said the industry must continue to offer crediting rates that outperform money market funds by a clear margin over the long haul. That means the industry cannot allow its investment strategies to become too conservative, he said.

Assuming that demand for the asset class does continue to grow, King said there now appears to be plenty of capacity to meet that demand. In 2012, the market produced more than $60 billion in new capacity, he said, and a recent survey of providers suggests that $100 billion in capacity should be available this year.

“I think the asset class will continue to grow,” King said. “I’m finding more and more influential consultants and advisors are recommending the adoption of stable value to their plan-sponsor clients. Things are looking very positive for the industry.”

Download the complete Stable Times Volume 17 Issue 1