What is an equity wash and why is it required with stable value?

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 (for example, a money market fund or a short-term bond fund) to first be directed to any other investment option not designated as a competing option for a period of time, usually 90 days. This provision is designed to reduce any arbitrage incentive and disruptive cash flows, thereby protecting the participants and the returns of the stable value investment option over the long term.

Is stable value regulated?

Yes, stable value investment options, investment contracts, investment managers, and other service providers such as insurance companies involved in stable…