Stable Value: Still a Firm Foundation for 401(k)
By David Wray
One of the benefits of 401(k) investing is the availability of an investment option not available to retail or IRA investors - stable value. Currently, participants choosing to make stable value their fixed investment choice are being rewarded. The Stable Value Investment Association’s (SVIA) Quarterly Characteristics Survey reported that for the first quarter of 2012, stable value fund assets delivered an average crediting rate (return) of 2.73 percent. Stable value continues to outperform money market funds, which returned 0.03 percent.
Stable value assets have risen by 27 percent since the height of the financial crisis in the fourth quarter of 2008, when SVIA began its survey. At that time, assets in the survey totaled $347 billion but have grown to $441 billion in the most recent quarter.
While stable value returns have been declining due to the low interest rate environment, they continue to offer a considerable premium over money market funds for defined contribution investors. And, they are an excellent diversifier for a 401(k) investment portfolio.
The survey, which covers 14 quarters, began at the height of the financial crisis and continues through the first quarter of 2012. It covers 24 stable value managers who collectively manage $441 billion in assets. The survey covers: assets under management, credit rates, duration, and overall credit quality for the underlying portfolios.