By Randy Myers
In an uncertain economic environment, stable value funds have continued to deliver to investors what they have long promised–long-term returns comparable to those available from intermediate-term bond funds but without the corresponding short-term volatility–SVIA president Gina Mitchell told participants at the organization’s 2010 Fall Forum in Washington, D.C.
Since the end of 2008, Mitchell said, stable value funds have handily outperformed money market funds. Stable value funds earned 4.05 percent as of December 31, 2008 and currently earn 3.11 percent. Both compare favorably to money market returns for the same time frame, which were 0.073 percent and 0.03 percent, respectively. “Historically, stable value funds have returned 100 to 120 basis points more than money market funds, and right now, the spreads are even wider,” she said.
Stable value funds’ market-to-book ratios, which are fluid, have also improved. During the height of the crisis, market-to-book ratios averaged 95.6 percent, and as of September 30, 2010, they are now averaging 100.4 percent.