Stable Value’s Contribution to the American Dream

The core mission of the stable value industry is a simple one: help retirement plan participants grow their nest eggs with minimal risk. In doing that, says James King, chairman of the Stable Value Investment Association, the industry is helping millions of working Americans pursue the American Dream: work hard, save, retire well.

That’s not a bad reason to go to work each day, and at the SVIA’s 2015 Spring Seminar, King encouraged attendees to be proud of the work their industry is doing. During the financial crisis that erupted in 2007, he noted, participants in defined contribution plans suffered market losses in excess of $1 trillion, but the stable value asset class held strong. The steady performance delivered by stable value funds hasn’t been lost on millennials, he said, many of whom now allocate a portion of their retirement savings to stable value funds, or on baby boomers, who saw how stable value can help protect their savings from market volatility. “We are the pillow that participants use to sleep on at night, knowing their savings are growing and staying safe,” King said.

Partly as a consequence, King said, assets in stable value funds grew significantly between 2007 and 2013, to more than $720 billion, even after the Department of Labor declined to include them on a list of “qualified default investment alternatives.” King also observed that stable value funds not only performed well through the financial crisis but also have performed well over longer periods of time. A recent analysis by Prudential Financial’s Stable Value Markets Group, where King serves as managing director and senior client portfolio manager, found that from 1990 through 2014 stable value funds generated average annual returns of 4.48 percent, while money market funds, typically viewed as their principal competition, averaged returns of just 2.04 percent, while inflation ran at 2.42 percent.