With economic uncertainty still casting a shadow, retail and institutional retirement savers are looking to stable value funds to help secure their investment. In fact, according to the Stable Value Investment Association (SVIA), these funds attracted a breathtaking $841 billion of gross investment flows. This groundbreaking was anticipated by the end of 2024. This trend signals a increasing desire for stability over volatility in today’s financial climate.
The recent turmoil in the stock market, driven in part by policy uncertainties, has prompted investors to seek safer alternatives. The Crane 100 Money Fund Index now has an annualized seven-day current yield of 4.14%. This makes clear the competitive nature of the returns that these funds generate. Stable value funds historically generate returns over money market funds with a consistent track record. This is part of what makes them an appealing investment choice for risk-averse investors.
In the 401(k) market, pioneering products include the John Hancock Stable Value Return Trust and the MissionSquare PLUS Fund. Through strategic investments, these funds promise safety and economic opportunity. They are designed for retirement savers who specifically don’t want to take a risk with market volatility.
Michael Conrath, chief retirement strategist at J.P. Morgan Asset Management, reiterated their benefits, saying stable value funds are a good source of…He stated, “They have provided returns that are in excess of money market funds, and you don’t have the volatility of the bond portfolio.” High returns attract investors to stable value funds. Unlike with traditional bonds, there is no risk tied to these dollars, which has spurred even further interest.
Zach Gieske, president of the SVIA, highlighted that the trend of significant inflows into stable value funds is not new. He noted that this pattern has been observed for several years, with particular spikes in 2022 and during the Covid pandemic. The desire for stability in turbulent financial times seems to be a common thread for retirement investors.
In Q1 of this year, stable value funds had great average crediting rates, 3.46% and 3.35%. This analysis is based upon data from Morningstar Direct. These high rates go a long way in explaining the enduring popularity of stable value funds. They truly shine in comparison to other investments available in today’s market.
To get a better understanding of investor behavior in this new, unpredictable economy, we spoke to Jania Stout, president of Prime Capital Retirement & Wellness. She noted that people leave the marketplace faster than they come back. This conservative investment posture is largely a result of continued uncertainty in the broader economy and a commitment to a more balanced and diversified investment portfolio.
The increased popularity of advisor-managed accounts and target date funds have contributed to savers thinking of their portfolios in this fashion. Stout explained that today’s savers are often looking for security, and they take the most comfort in a diversification strategy. This trend has only increased, particularly with money market funds getting the spotlight for their attractive yields amid the Federal Reserve’s persistently high interest rates.
As retirement savers face greater challenges than ever before in today’s economic environment, stable value funds should be on savers’ radars. These funds provide a perfect place for those who crave stability and guaranteed returns. The torrid pace of demand for these funds is a sign of the times — investors are moving away from more risky investments toward a focus on safety over returns.