How does stable value compare to other investment options?

Stable value investment options generally have the objective of preserving a participant’s invested capital (or principal) while providing liquidity and steady, positive returns that have exceeded those available in money market investments over time.* In fact, 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. The table below illustrates the relative risk (as measured by standard deviation) and gross returns of stable value investments over time:

Table footnotes:

"Stable Value" is a simulation of book value returns in a hypothetical fund holding intermediate bonds and stable value wrap contracts, with crediting interest rates reset monthly using the industry accepted crediting rate formula. The bond returns incorporated into the simulation are monthly market value returns from the Barclays Intermediate Government/Credit Bond Index, with gains/losses reflected in future crediting rates by amortizing market-vs.-book values over intermediate bond index durations. This simulation incorporates no ongoing cash flows into or out of the fund. Returns illustrated are gross before any fees.
“Money Market Funds” is a simulation of money market returns from the iMoneyNet MFR Money Funds Index. Returns illustrated are gross before any fees.
”Intermediate Bonds” is a simulation of market value bond fund returns from the Barclays Intermediate Government/Credit Bond Index. Returns illustrated are gross before any fees.
"Stocks" is the S&P 500 Index with dividends reinvested: a widely used barometer of U.S. stock market performance; as a market-weighted index of leading companies in leading industries, it is dominated by large-capitalization companies. Returns illustrated are gross before any fees.
The performance data shown represents past performance, which is not a guarantee of future results. Current performance may be lower or higher than the performance data cited. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

For the 20-year period ending July 31, 2015 stable value simulated returns averaged a gross return of 5.96% with a standard deviation, which is a measure of risk, of 0.54%. For money market funds, the average total return was 3.10% with a standard deviation of 0.71%; for intermediate-term bonds, 6.13% and 3.17%; and for stocks, 10.36% and 14.48%.

As shown in the chart below, over the long term, the growth of $1 invested in the stable value simulated portfolio outpaced that of the money market index (which is of much shorter duration than the stable value model portfolio), but also captured most of the cumulative growth of $1 in the Barclays Intermediate-Term Bond Index.*

Also important to investors is the volatility of returns, and as show in the following chart, the volatility of the stable value model portfolio’s monthly returns is similar to that of the money market index, and far less variable than that of the intermediate-term bond index.*


*Past performance is not a guarantee of future results.