Stable Value Market Posts Sixth Consecutive Year of Growth

By Randy Myers


According to data compiled by the Stable Value Investment Association, the stable value market grew for a sixth consecutive year in 2016, with total assets climbing 5 percent to $821 billion. Stable value now represents approximately 11.7 percent of the $7 trillion held in defined contribution retirement plans.

SVIA Chairman Steve Kolocotronis, Vice President and Associate General Counsel for Fidelity Investments, shared the latest data for stable value assets while joining Association President Gina Mitchell in opening the SVIA’s 2017 Spring Seminar in Half Moon Bay, California.

Kolocotronis noted that stable value had accounted for 18 percent of all defined contribution plan assets as recently as 2008. He attributed
the downturn in market share largely to the Department of Labor’s 2007 decision to grant Qualified Default Investment Alternative (QDIA) status to target-date funds, but not stable value funds. Since then, younger plan participants who don’t make their own investment choices have largely been funneled into target-date funds, which, as QDIAs, provide safe-harbor protections to plan sponsors.

He also noted that new money market fund rules from the U.S. Securities & Exchange Commission have prompted some retirement plans to remove money market funds from their investment lineups and replace them with stable value funds, a trend he hopes will gather steam over time.

Additionally, the SVIA hasn’t given up on the idea of trying to convince the Department of Labor to recognize stable value as a QDIA, and continues to explore the issue. In the meantime, Kolocotronis said that while stable value may have lost some of its status as an accumulation vehicle, it is increasingly being viewed as an investment appropriate for investors who have begun to draw assets out of their retirement plans. A significant number of older participants in plans managed by his firm have money in stable value when they retire, with the percentage “drastically increasing” among those who’ve reached the age where they are required to begin taking distributions from their plans.

“As plan sponsors have struggled with the concept of retirement income and how to provide it to plan participants, I think participants have figured out that stable value can be the appropriate retirement income option,” Kolocotronis said. “As an industry, it might behoove us to push that as an option for plan sponsors. If you have a stable value fund, you (already) have a retirement income solution that will serve your participants well.”