What are stable value funds? How do they work? What are the benefits? What are the risks? These are some of the basic questions most have. Below we will answer these questions and others to help you increase your knowledge and understanding of stable value funds.
Stable value investment options do not exist in publicly available investment vehicles, such as mutual funds.
Because of regulatory rules, stable value as an asset class is not available in either IRAs or taxable accounts.
An equity wash is a contractual provision in a stable value investment option that requires any transfer a participant makes from the stable value investment option to a competing option to first be directed to any other investment option for a period.
In stable value, GICs, wrap contracts, and group annuity contracts are used to help deliver stable value.
Over a business cycle, most stable value investment options have historically provided gross returns similar to short- to intermediate-maturity bond strategies but without the daily mark-to-market volatility.
Stable value is usually offered by a plan sponsor in a defined contribution plan as a low-risk investment that focuses on capital preservation and liquidity, while providing steady, positive returns to a plan’s participants.