Stable Value Info

The Stable Value Investment Option

Stable value is an asset class designed to provide preservation of capital and returns that are consistent, regardless of stock and bond market volatility. Stable-value funds are designed to provide the stability of a money market’s net asset value (NAV) with the return potential of a bond fund. Allocating part of your portfolio toward an investment that seeks to buffer investments from market fluctuation may help stabilize overall portfolio performance through differing market cycles. Stable-value funds can provide investors with a long-term, high-quality investment option designed to outperform money market funds throughout a market cycle, while at the same time maintaining very low return volatility (risk).

The Wells Fargo Stable Return Fund, managed by Galliard Capital Management (a wholly-owned subsidiary of Wells Fargo), was selected by the MPPP Trustees through a due diligence process that compared the risk and returns to other available stable value options. For more information on Galliard Capital Management click here.

Wells Fargo Stable Return Fund Profile

Stable Value Web Site

What is Stable Value?

Stable-value funds are a low-risk investment option. The objective of stable-value funds is to provide safety of principal, stability and consistency of returns. To achieve these objectives, stable-value funds invest primarily in high-quality, fixed-income securities issued by the U.S. government and its agencies, as well as investment-grade debt securities issued by corporations, mortgage-backed securities and asset-backed securities. The funds then enter into maintenance agreements (“wrap contracts”) with one or more financial institutions (“wrap providers”) for the purpose of maintaining a stable or positive net asset value. The wrap contract smooths performance and reduces the impact of ups and downs in the market, as shown in the chart on the right.

Who invests?

Stable-value funds are available to investors through tax-qualified retirement plans [i.e., 401(k) plans and IRAs]. Stable-value funds typically are appropriate for investors who desire low volatility, stable principal value and consistent returns on a component of their retirement savings. The appeal of stable-value funds has increased as more of the U.S. population reaches retirement age. Stable-value funds are long-term retirement investments. Used as a part of an investor’s asset allocation model, they can help to offset volatility in other areas of the market. Stable-value funds are not suitable for short-term use.

Brief History of Stable Value

Stable-value funds originated in the late 1970s as an investment option for retirement plans. These funds primarily were made up of GICs (“Guaranteed Investment Contracts”) issued by banks and insurance companies. GICs are fixed-rate, fixed-maturity contracts against the general account of the issuing bank or insurance company. GICs are not traded in the secondary market. They are sometimes still used today, but to a much lesser degree. In the early and mid-1990s, the stable-value market expanded to include other fixed-income assets wrapped by a bank or insurance company so that the final product resembled a GIC but offered an opportunity for much greater asset diversification, flexibility and ownership of assets. In the late 1990s, stable-value mutual funds emerged as a solution for IRA investors who wanted access to a stable-value option similar to those they had invested in through their employer-sponsored retirement accounts. Today, stable-value investments are a crucial segment of many investors’ long-term asset allocation models.

Performance

Stable-value fund returns trend gradually with interest rates, but they have much less short-term volatility. Stable-value funds have returns similar to those of short-term bond funds, but with lower volatility. This quality positions stable-value funds well against bond funds in a rising-interest-rate environment.






	The Stable Value Investment Option Stable value is an asset class designed to provide preservation of capital and returns that are consistent, regardless of stock and bond market volatility. Stable-value funds are designed to provide the stability of a money market’s net asset value (NAV) with the return potential of a bond fund. Allocating part of your portfolio toward an investment that seeks to buffer investments from market fluctuation may help stabilize overall portfolio performance through differing market cycles. Stable-value funds can provide investors with a long-term, high-quality investment option designed to outperform money market funds throughout a market cycle, while at the same time maintaining very low return volatility (risk). The Wells Fargo Stable Return Fund, managed by Galliard Capital Management (a wholly-owned subsidiary of Wells Fargo), was selected by the MPPP Trustees through a due diligence process that compared the risk and returns to other available stable value options. For more information on Galliard Capital Management click here. Wells Fargo Stable Return Fund Profile Stable Value Web Site What is Stable Value? Stable-value funds are a low-risk investment option. The objective of stable-value funds is to provide safety of principal, stability and consistency of returns. To achieve these objectives, stable-value funds invest primarily in high-quality, fixed-income securities issued by the U.S. government and its agencies, as well as investment-grade debt securities issued by corporations, mortgage-backed securities and asset-backed securities. The funds then enter into maintenance agreements (“wrap contracts”) with one or more financial institutions (“wrap providers”) for the purpose of maintaining a stable or positive net asset value. The wrap contract smooths performance and reduces the impact of ups and downs in the market, as shown in the chart on the right. Who invests? Stable-value funds are available to investors through tax-qualified retirement plans [i.e., 401(k) plans and IRAs]. Stable-value funds typically are appropriate for investors who desire low volatility, stable principal value and consistent returns on a component of their retirement savings. The appeal of stable-value funds has increased as more of the U.S. population reaches retirement age. Stable-value funds are long-term retirement investments. Used as a part of an investor’s asset allocation model, they can help to offset volatility in other areas of the market. Stable-value funds are not suitable for short-term use. Brief History of Stable Value Stable-value funds originated in the late 1970s as an investment option for retirement plans. These funds primarily were made up of GICs (“Guaranteed Investment Contracts”) issued by banks and insurance companies. GICs are fixed-rate, fixed-maturity contracts against the general account of the issuing bank or insurance company. GICs are not traded in the secondary market. They are sometimes still used today, but to a much lesser degree. In the early and mid-1990s, the stable-value market expanded to include other fixed-income assets wrapped by a bank or insurance company so that the final product resembled a GIC but offered an opportunity for much greater asset diversification, flexibility and ownership of assets. In the late 1990s, stable-value mutual funds emerged as a solution for IRA investors who wanted access to a stable-value option similar to those they had invested in through their employer-sponsored retirement accounts. Today, stable-value investments are a crucial segment of many investors’ long-term asset allocation models. Performance Stable-value fund returns trend gradually with interest rates, but they have much less short-term volatility. Stable-value funds have returns similar to those of short-term bond funds, but with lower volatility. This quality positions stable-value funds well against bond funds in a rising-interest-rate environment.
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