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Wednesday, August 19, 2009

Is Stable Value Stabilizing?

News summary by MFWire's editors

Fundsters not working in the retirement plan marketplace may not be interested in Wednesday's "Fund Track" column. The Wall Street Journal's Daisy Maxey returns to the subject of stable value, a niche capital preservation-focused, fixed income and insurance-based investment class used in retirement plans.

Maxey spoke with several stable value industry insiders for the article -- including Hueler president Kelli Huler, Finacorp Securities chief economist and research director David Merkel, Buck Consultants investment consulting director Betsy Vary and Watson Wyatt Worldwide senior investment consultant Sue Walton -- and concluded that stable value funds' health is improving.

Stable value funds, unlike mutual funds, can have a book value that differs from their market value, and Hueler estimates that the average stable value fund now has a market value that is 97.5 percent of its book value, down from 99 percent last year yet up from 95 percent earlier in 2009. Maxey had once worried about stable value fund failures along the lines of the Reserve Prime money market fund breaking the buck last year. (Money market funds and stable value funds compete for capital preservation dollars in 401(k) plans.) Yet Maxey and her sources are less worried now.

"I think if we were going to see any problems, we would have seen that last year," Walton told the WSJ, adding that she doesn't expect any stable value funds to collapse. 

Edited by: Neil Anderson, Managing Editor

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