Post on 10-Jul-2020
MEMORANDUM
November 17 2011
To File No S7-32-11
From Gena Lai Office of Commissioner Troy A Paredes
Re Acceptance of Public Submissions Regarding the Study of Stable Value Contracts (Request for Comment)
On November 16 2011 Dawn Jessen and Gena Lai Counsels to Commissioner Troy A Paredes met with the following individuals representing the Stable Value Investment Association (SVIA)
Tony Camp Vice President Stable Value Product ING Co-Chairman SVIA Government Relations Committee
James King Vice President Prudential Life Insurance Incoming-Chairman SVIA Board of Directors
Stephen Kolocotronis Vice President and Associate General Counsel Fidelity Investments Co-Chairman Government Relations Committee
Marc Magnoli Executive Director JPMorgan Chase Bank NA Chairman SVIA Board of Directors
Gina Mitchell President SVIA President Stable Value Investment Association
Brad Bondi Cadwalader Wickersham amp Taft LLP
Tony Mansfield Cadwalader Wickersham amp Taft LLP
Jonathan Flynn Cadwalader Wickersham amp Taft LLP
The participants discussed generally the above referenced Study The enclosed presentation was provided to Counsels
o Stable Value Funds Overview
SVIA 1
Stable Value Investment Association
~ Dedicated to educating plan sponsors and the public on the importance of saving and investing for retirement and the contribution that stable value funds can make to a financially secure retirement
~ Voice for the stable value investment community on issues affecting stable value and retirement security
~ Represents all segments of the stable value investment community plan sponsors investment managers bank issuers and insurance Issuers
~ Members collectively manage almost $540 billion in stable value assets
SVIA 2
Why Stable Value Is a Key Part of Asset Allocation ~ Stable value is a fundamental component of defined contribution plans because it offers
raquo Principal protection raquo Steady predictable returns consistent with a conservative principal protection vehicle raquo Benefit-responsive liquidity
~ Stable value is a low-risk cost-effective investment option used by millions of participants to achieve their desired risk tolerance in asset allocation
~ Participants who invest in stable value funds are raquo Retirees or individuals nearing retirement who will begin to access retirement funds now or in
the near future raquo Conservative investors who seek a core portfolio that provides an attractive return coupled
with the opportunity for low volatility and preservation of capital raquo Moderate or aggressive investors seeking diversification to enhance their overall portfolio riskshy
adjusted returns raquo Individuals seeking an alternative to money market funds and short-term bond funds raquo Individuals who have been placed in a stable value fund by default because they have not
made an asset allocation decision
Funds to the left have potentially more Funds to the right have potentially less inflation risk and less investment risk inflation risk and more investment risk
SVIA Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1
3
401 (k) Plans that Offer Stable Value Funds
Average Asset Allocation of 401 (k) Accounts for Plans Average Asset Allocation of 401(k) Accounts for Plans with Stable Value Fund Investment Option and
with Stable Value Fund Investment Option and No Employer Stock Company Stock
541 438
~ be oct~ ~ ~ ~ s ~ fr0 laquo~ laquo~ blaquo~ laquo gt0laquo (~~~ ~ ~ ~ ~ ~ ~ ~v 0cfi ltG) ~flj 0 cP ~ be be ~o ~ ~be laquo~be OJ~ov
~lIJ 0~ ~~ fr0 laquo~ laquo~ blaquo~ laquo gt0 (~~v ~ o~ OJ
~o ~ ~ ~ ~ ~ ~ ~ ~ ~v CJ~ ltG) ~flj 0 cP (j ~lI ~ ~~lI ~ 0 ~flj
v ~ o~ OJ ~o ~
_2008 _2006 -2008 _2006
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute and 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2006 Research Perspective August 2007 Volume 13 Number 1 Investment Company Institute
4
Participants of All Ages Use Stable Value
374
352
152
91 88 82 83 77 82
68 62 66 55
30
Equity Funds Lifecycle Funds Non-Lifecycle Funds
470
441
Asset Allocation by Age for 2008
38
232
162 152
145
127123 rmiddot
10 3109[middot J 510110 [J 9493_middotf~ 8784
78j
~l 73_71 74
55 52
~
57
Bond Funds Money Market Stable Value Company Stock Other Unknown Funds Funds
20s bull 30s 40s [i 50s bull 60s bull All
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute
5
Stable Value Provides Capital Preservation and Consistent Steady Returns
Volatility of Returns 123188 thru 093011
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~
-Model Stable Value Account -iMoneyNet Money Market Funds -Barclays Intermediate GovCredit Index
400
300
200
I) ra 100 amp gt ~ 000 II bull IN I nTlIJ ~I I I I - lIl1l1lII 111 1 III II mI U1 T1tHI I o
middot100
middot200
middot300
Sources Stable Value Investment Association iMoneyNet Money Market Funds and Barclays Intermediate GovCredit Index SVIA 6
~I Stable Value Offers Higher Return Potential than Money Market Funds
Growth of $1 123188 thru 093011
$500
449 $450 I
$400
$350
$300 CI)
~ $250 gt
$200 225
$150
$100
$050
$000 (IPo p(I p p ~o
I p p pIigt pI pb ~oo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ l igt~ gtlt1 )lt0gtlt1 )$ )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )$ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )-Ogt~ )-Ogt~
-Model Stable Value Account - iMoneyNet Money Market Funds - Barclays Intermediate GovCredit Index
Sources Stable Value Investment Association iMoneyNet Money Market Funds and 8arclays Intermediate GovCredit Index SVIA 7
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
o Stable Value Funds Overview
SVIA 1
Stable Value Investment Association
~ Dedicated to educating plan sponsors and the public on the importance of saving and investing for retirement and the contribution that stable value funds can make to a financially secure retirement
~ Voice for the stable value investment community on issues affecting stable value and retirement security
~ Represents all segments of the stable value investment community plan sponsors investment managers bank issuers and insurance Issuers
~ Members collectively manage almost $540 billion in stable value assets
SVIA 2
Why Stable Value Is a Key Part of Asset Allocation ~ Stable value is a fundamental component of defined contribution plans because it offers
raquo Principal protection raquo Steady predictable returns consistent with a conservative principal protection vehicle raquo Benefit-responsive liquidity
~ Stable value is a low-risk cost-effective investment option used by millions of participants to achieve their desired risk tolerance in asset allocation
~ Participants who invest in stable value funds are raquo Retirees or individuals nearing retirement who will begin to access retirement funds now or in
the near future raquo Conservative investors who seek a core portfolio that provides an attractive return coupled
with the opportunity for low volatility and preservation of capital raquo Moderate or aggressive investors seeking diversification to enhance their overall portfolio riskshy
adjusted returns raquo Individuals seeking an alternative to money market funds and short-term bond funds raquo Individuals who have been placed in a stable value fund by default because they have not
made an asset allocation decision
Funds to the left have potentially more Funds to the right have potentially less inflation risk and less investment risk inflation risk and more investment risk
SVIA Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1
3
401 (k) Plans that Offer Stable Value Funds
Average Asset Allocation of 401 (k) Accounts for Plans Average Asset Allocation of 401(k) Accounts for Plans with Stable Value Fund Investment Option and
with Stable Value Fund Investment Option and No Employer Stock Company Stock
541 438
~ be oct~ ~ ~ ~ s ~ fr0 laquo~ laquo~ blaquo~ laquo gt0laquo (~~~ ~ ~ ~ ~ ~ ~ ~v 0cfi ltG) ~flj 0 cP ~ be be ~o ~ ~be laquo~be OJ~ov
~lIJ 0~ ~~ fr0 laquo~ laquo~ blaquo~ laquo gt0 (~~v ~ o~ OJ
~o ~ ~ ~ ~ ~ ~ ~ ~ ~v CJ~ ltG) ~flj 0 cP (j ~lI ~ ~~lI ~ 0 ~flj
v ~ o~ OJ ~o ~
_2008 _2006 -2008 _2006
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute and 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2006 Research Perspective August 2007 Volume 13 Number 1 Investment Company Institute
4
Participants of All Ages Use Stable Value
374
352
152
91 88 82 83 77 82
68 62 66 55
30
Equity Funds Lifecycle Funds Non-Lifecycle Funds
470
441
Asset Allocation by Age for 2008
38
232
162 152
145
127123 rmiddot
10 3109[middot J 510110 [J 9493_middotf~ 8784
78j
~l 73_71 74
55 52
~
57
Bond Funds Money Market Stable Value Company Stock Other Unknown Funds Funds
20s bull 30s 40s [i 50s bull 60s bull All
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute
5
Stable Value Provides Capital Preservation and Consistent Steady Returns
Volatility of Returns 123188 thru 093011
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~
-Model Stable Value Account -iMoneyNet Money Market Funds -Barclays Intermediate GovCredit Index
400
300
200
I) ra 100 amp gt ~ 000 II bull IN I nTlIJ ~I I I I - lIl1l1lII 111 1 III II mI U1 T1tHI I o
middot100
middot200
middot300
Sources Stable Value Investment Association iMoneyNet Money Market Funds and Barclays Intermediate GovCredit Index SVIA 6
~I Stable Value Offers Higher Return Potential than Money Market Funds
Growth of $1 123188 thru 093011
$500
449 $450 I
$400
$350
$300 CI)
~ $250 gt
$200 225
$150
$100
$050
$000 (IPo p(I p p ~o
I p p pIigt pI pb ~oo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ l igt~ gtlt1 )lt0gtlt1 )$ )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )$ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )-Ogt~ )-Ogt~
-Model Stable Value Account - iMoneyNet Money Market Funds - Barclays Intermediate GovCredit Index
Sources Stable Value Investment Association iMoneyNet Money Market Funds and 8arclays Intermediate GovCredit Index SVIA 7
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
Stable Value Investment Association
~ Dedicated to educating plan sponsors and the public on the importance of saving and investing for retirement and the contribution that stable value funds can make to a financially secure retirement
~ Voice for the stable value investment community on issues affecting stable value and retirement security
~ Represents all segments of the stable value investment community plan sponsors investment managers bank issuers and insurance Issuers
~ Members collectively manage almost $540 billion in stable value assets
SVIA 2
Why Stable Value Is a Key Part of Asset Allocation ~ Stable value is a fundamental component of defined contribution plans because it offers
raquo Principal protection raquo Steady predictable returns consistent with a conservative principal protection vehicle raquo Benefit-responsive liquidity
~ Stable value is a low-risk cost-effective investment option used by millions of participants to achieve their desired risk tolerance in asset allocation
~ Participants who invest in stable value funds are raquo Retirees or individuals nearing retirement who will begin to access retirement funds now or in
the near future raquo Conservative investors who seek a core portfolio that provides an attractive return coupled
with the opportunity for low volatility and preservation of capital raquo Moderate or aggressive investors seeking diversification to enhance their overall portfolio riskshy
adjusted returns raquo Individuals seeking an alternative to money market funds and short-term bond funds raquo Individuals who have been placed in a stable value fund by default because they have not
made an asset allocation decision
Funds to the left have potentially more Funds to the right have potentially less inflation risk and less investment risk inflation risk and more investment risk
SVIA Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1
3
401 (k) Plans that Offer Stable Value Funds
Average Asset Allocation of 401 (k) Accounts for Plans Average Asset Allocation of 401(k) Accounts for Plans with Stable Value Fund Investment Option and
with Stable Value Fund Investment Option and No Employer Stock Company Stock
541 438
~ be oct~ ~ ~ ~ s ~ fr0 laquo~ laquo~ blaquo~ laquo gt0laquo (~~~ ~ ~ ~ ~ ~ ~ ~v 0cfi ltG) ~flj 0 cP ~ be be ~o ~ ~be laquo~be OJ~ov
~lIJ 0~ ~~ fr0 laquo~ laquo~ blaquo~ laquo gt0 (~~v ~ o~ OJ
~o ~ ~ ~ ~ ~ ~ ~ ~ ~v CJ~ ltG) ~flj 0 cP (j ~lI ~ ~~lI ~ 0 ~flj
v ~ o~ OJ ~o ~
_2008 _2006 -2008 _2006
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute and 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2006 Research Perspective August 2007 Volume 13 Number 1 Investment Company Institute
4
Participants of All Ages Use Stable Value
374
352
152
91 88 82 83 77 82
68 62 66 55
30
Equity Funds Lifecycle Funds Non-Lifecycle Funds
470
441
Asset Allocation by Age for 2008
38
232
162 152
145
127123 rmiddot
10 3109[middot J 510110 [J 9493_middotf~ 8784
78j
~l 73_71 74
55 52
~
57
Bond Funds Money Market Stable Value Company Stock Other Unknown Funds Funds
20s bull 30s 40s [i 50s bull 60s bull All
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute
5
Stable Value Provides Capital Preservation and Consistent Steady Returns
Volatility of Returns 123188 thru 093011
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~
-Model Stable Value Account -iMoneyNet Money Market Funds -Barclays Intermediate GovCredit Index
400
300
200
I) ra 100 amp gt ~ 000 II bull IN I nTlIJ ~I I I I - lIl1l1lII 111 1 III II mI U1 T1tHI I o
middot100
middot200
middot300
Sources Stable Value Investment Association iMoneyNet Money Market Funds and Barclays Intermediate GovCredit Index SVIA 6
~I Stable Value Offers Higher Return Potential than Money Market Funds
Growth of $1 123188 thru 093011
$500
449 $450 I
$400
$350
$300 CI)
~ $250 gt
$200 225
$150
$100
$050
$000 (IPo p(I p p ~o
I p p pIigt pI pb ~oo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ l igt~ gtlt1 )lt0gtlt1 )$ )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )$ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )-Ogt~ )-Ogt~
-Model Stable Value Account - iMoneyNet Money Market Funds - Barclays Intermediate GovCredit Index
Sources Stable Value Investment Association iMoneyNet Money Market Funds and 8arclays Intermediate GovCredit Index SVIA 7
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
Why Stable Value Is a Key Part of Asset Allocation ~ Stable value is a fundamental component of defined contribution plans because it offers
raquo Principal protection raquo Steady predictable returns consistent with a conservative principal protection vehicle raquo Benefit-responsive liquidity
~ Stable value is a low-risk cost-effective investment option used by millions of participants to achieve their desired risk tolerance in asset allocation
~ Participants who invest in stable value funds are raquo Retirees or individuals nearing retirement who will begin to access retirement funds now or in
the near future raquo Conservative investors who seek a core portfolio that provides an attractive return coupled
with the opportunity for low volatility and preservation of capital raquo Moderate or aggressive investors seeking diversification to enhance their overall portfolio riskshy
adjusted returns raquo Individuals seeking an alternative to money market funds and short-term bond funds raquo Individuals who have been placed in a stable value fund by default because they have not
made an asset allocation decision
Funds to the left have potentially more Funds to the right have potentially less inflation risk and less investment risk inflation risk and more investment risk
SVIA Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1
3
401 (k) Plans that Offer Stable Value Funds
Average Asset Allocation of 401 (k) Accounts for Plans Average Asset Allocation of 401(k) Accounts for Plans with Stable Value Fund Investment Option and
with Stable Value Fund Investment Option and No Employer Stock Company Stock
541 438
~ be oct~ ~ ~ ~ s ~ fr0 laquo~ laquo~ blaquo~ laquo gt0laquo (~~~ ~ ~ ~ ~ ~ ~ ~v 0cfi ltG) ~flj 0 cP ~ be be ~o ~ ~be laquo~be OJ~ov
~lIJ 0~ ~~ fr0 laquo~ laquo~ blaquo~ laquo gt0 (~~v ~ o~ OJ
~o ~ ~ ~ ~ ~ ~ ~ ~ ~v CJ~ ltG) ~flj 0 cP (j ~lI ~ ~~lI ~ 0 ~flj
v ~ o~ OJ ~o ~
_2008 _2006 -2008 _2006
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute and 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2006 Research Perspective August 2007 Volume 13 Number 1 Investment Company Institute
4
Participants of All Ages Use Stable Value
374
352
152
91 88 82 83 77 82
68 62 66 55
30
Equity Funds Lifecycle Funds Non-Lifecycle Funds
470
441
Asset Allocation by Age for 2008
38
232
162 152
145
127123 rmiddot
10 3109[middot J 510110 [J 9493_middotf~ 8784
78j
~l 73_71 74
55 52
~
57
Bond Funds Money Market Stable Value Company Stock Other Unknown Funds Funds
20s bull 30s 40s [i 50s bull 60s bull All
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute
5
Stable Value Provides Capital Preservation and Consistent Steady Returns
Volatility of Returns 123188 thru 093011
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~
-Model Stable Value Account -iMoneyNet Money Market Funds -Barclays Intermediate GovCredit Index
400
300
200
I) ra 100 amp gt ~ 000 II bull IN I nTlIJ ~I I I I - lIl1l1lII 111 1 III II mI U1 T1tHI I o
middot100
middot200
middot300
Sources Stable Value Investment Association iMoneyNet Money Market Funds and Barclays Intermediate GovCredit Index SVIA 6
~I Stable Value Offers Higher Return Potential than Money Market Funds
Growth of $1 123188 thru 093011
$500
449 $450 I
$400
$350
$300 CI)
~ $250 gt
$200 225
$150
$100
$050
$000 (IPo p(I p p ~o
I p p pIigt pI pb ~oo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ l igt~ gtlt1 )lt0gtlt1 )$ )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )$ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )-Ogt~ )-Ogt~
-Model Stable Value Account - iMoneyNet Money Market Funds - Barclays Intermediate GovCredit Index
Sources Stable Value Investment Association iMoneyNet Money Market Funds and 8arclays Intermediate GovCredit Index SVIA 7
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
401 (k) Plans that Offer Stable Value Funds
Average Asset Allocation of 401 (k) Accounts for Plans Average Asset Allocation of 401(k) Accounts for Plans with Stable Value Fund Investment Option and
with Stable Value Fund Investment Option and No Employer Stock Company Stock
541 438
~ be oct~ ~ ~ ~ s ~ fr0 laquo~ laquo~ blaquo~ laquo gt0laquo (~~~ ~ ~ ~ ~ ~ ~ ~v 0cfi ltG) ~flj 0 cP ~ be be ~o ~ ~be laquo~be OJ~ov
~lIJ 0~ ~~ fr0 laquo~ laquo~ blaquo~ laquo gt0 (~~v ~ o~ OJ
~o ~ ~ ~ ~ ~ ~ ~ ~ ~v CJ~ ltG) ~flj 0 cP (j ~lI ~ ~~lI ~ 0 ~flj
v ~ o~ OJ ~o ~
_2008 _2006 -2008 _2006
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute and 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2006 Research Perspective August 2007 Volume 13 Number 1 Investment Company Institute
4
Participants of All Ages Use Stable Value
374
352
152
91 88 82 83 77 82
68 62 66 55
30
Equity Funds Lifecycle Funds Non-Lifecycle Funds
470
441
Asset Allocation by Age for 2008
38
232
162 152
145
127123 rmiddot
10 3109[middot J 510110 [J 9493_middotf~ 8784
78j
~l 73_71 74
55 52
~
57
Bond Funds Money Market Stable Value Company Stock Other Unknown Funds Funds
20s bull 30s 40s [i 50s bull 60s bull All
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute
5
Stable Value Provides Capital Preservation and Consistent Steady Returns
Volatility of Returns 123188 thru 093011
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~
-Model Stable Value Account -iMoneyNet Money Market Funds -Barclays Intermediate GovCredit Index
400
300
200
I) ra 100 amp gt ~ 000 II bull IN I nTlIJ ~I I I I - lIl1l1lII 111 1 III II mI U1 T1tHI I o
middot100
middot200
middot300
Sources Stable Value Investment Association iMoneyNet Money Market Funds and Barclays Intermediate GovCredit Index SVIA 6
~I Stable Value Offers Higher Return Potential than Money Market Funds
Growth of $1 123188 thru 093011
$500
449 $450 I
$400
$350
$300 CI)
~ $250 gt
$200 225
$150
$100
$050
$000 (IPo p(I p p ~o
I p p pIigt pI pb ~oo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ l igt~ gtlt1 )lt0gtlt1 )$ )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )$ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )-Ogt~ )-Ogt~
-Model Stable Value Account - iMoneyNet Money Market Funds - Barclays Intermediate GovCredit Index
Sources Stable Value Investment Association iMoneyNet Money Market Funds and 8arclays Intermediate GovCredit Index SVIA 7
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
Participants of All Ages Use Stable Value
374
352
152
91 88 82 83 77 82
68 62 66 55
30
Equity Funds Lifecycle Funds Non-Lifecycle Funds
470
441
Asset Allocation by Age for 2008
38
232
162 152
145
127123 rmiddot
10 3109[middot J 510110 [J 9493_middotf~ 8784
78j
~l 73_71 74
55 52
~
57
Bond Funds Money Market Stable Value Company Stock Other Unknown Funds Funds
20s bull 30s 40s [i 50s bull 60s bull All
SVIA Source 401 (k) Plan Asset Allocation Account Balances and Loan Activity in 2008 Research Perspective October 2009 Volume 15 Number 2 Investment Company Institute
5
Stable Value Provides Capital Preservation and Consistent Steady Returns
Volatility of Returns 123188 thru 093011
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~
-Model Stable Value Account -iMoneyNet Money Market Funds -Barclays Intermediate GovCredit Index
400
300
200
I) ra 100 amp gt ~ 000 II bull IN I nTlIJ ~I I I I - lIl1l1lII 111 1 III II mI U1 T1tHI I o
middot100
middot200
middot300
Sources Stable Value Investment Association iMoneyNet Money Market Funds and Barclays Intermediate GovCredit Index SVIA 6
~I Stable Value Offers Higher Return Potential than Money Market Funds
Growth of $1 123188 thru 093011
$500
449 $450 I
$400
$350
$300 CI)
~ $250 gt
$200 225
$150
$100
$050
$000 (IPo p(I p p ~o
I p p pIigt pI pb ~oo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ l igt~ gtlt1 )lt0gtlt1 )$ )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )$ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )-Ogt~ )-Ogt~
-Model Stable Value Account - iMoneyNet Money Market Funds - Barclays Intermediate GovCredit Index
Sources Stable Value Investment Association iMoneyNet Money Market Funds and 8arclays Intermediate GovCredit Index SVIA 7
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
Stable Value Provides Capital Preservation and Consistent Steady Returns
Volatility of Returns 123188 thru 093011
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~ )~~
-Model Stable Value Account -iMoneyNet Money Market Funds -Barclays Intermediate GovCredit Index
400
300
200
I) ra 100 amp gt ~ 000 II bull IN I nTlIJ ~I I I I - lIl1l1lII 111 1 III II mI U1 T1tHI I o
middot100
middot200
middot300
Sources Stable Value Investment Association iMoneyNet Money Market Funds and Barclays Intermediate GovCredit Index SVIA 6
~I Stable Value Offers Higher Return Potential than Money Market Funds
Growth of $1 123188 thru 093011
$500
449 $450 I
$400
$350
$300 CI)
~ $250 gt
$200 225
$150
$100
$050
$000 (IPo p(I p p ~o
I p p pIigt pI pb ~oo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ l igt~ gtlt1 )lt0gtlt1 )$ )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )$ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )-Ogt~ )-Ogt~
-Model Stable Value Account - iMoneyNet Money Market Funds - Barclays Intermediate GovCredit Index
Sources Stable Value Investment Association iMoneyNet Money Market Funds and 8arclays Intermediate GovCredit Index SVIA 7
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
~I Stable Value Offers Higher Return Potential than Money Market Funds
Growth of $1 123188 thru 093011
$500
449 $450 I
$400
$350
$300 CI)
~ $250 gt
$200 225
$150
$100
$050
$000 (IPo p(I p p ~o
I p p pIigt pI pb ~oo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ l igt~ gtlt1 )lt0gtlt1 )$ )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )-0gtlt1 )$ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ )-Ogt~ )-Ogt~
-Model Stable Value Account - iMoneyNet Money Market Funds - Barclays Intermediate GovCredit Index
Sources Stable Value Investment Association iMoneyNet Money Market Funds and 8arclays Intermediate GovCredit Index SVIA 7
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
) Benefit Responsiveness Distinguishes Stable Value From Other Asset Classes
)gt Benefit-responsiveness means participants transact at book value (principal plus accrued interest)
~ Benefit responsiveness helps the stable value fund achieve the following objectives
raquo Principal preservation with capital appreciation raquo Consistent conservative returns raquo Returns similar to bond funds with the liquidity of money market funds
~ Benefit responsiveness is provided through one or more different types of investment contracts
~ Benefit responsiveness criteria is established by the Financial Accounting Standards Board (FASB) and all five requirements must be met
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 and SOP 94-4-1 SVIA 8
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
FASB Requirements for Benefit Responsiveness
~ FASB established criteria for benefit responsiveness in FSP AAG INV-a All must be satisfied
1 Investment contract is effected directly between the fund and issuer and prohibits the sale or assignment of the contract or its proceeds to another party without the consent of the issuer
2 The repayment ofprincipal and interest credited to participants in the fund is a financial obligation of the issuer of the investment contract or prospective interest crediting rate adjustments are provided to participants in the fund on a designated pool of investments held by the fund or a contract issuer who is a financially responsible third party and provides assurances that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero
3 The terms of the investment contract require all permitted participant-initiated transactions with the fund to occur at book value
4 An event (such as bankruptcy) that limits the ability of the fund to transact at book value with the issuer and that also limits the ability of the fund to transact at book value with participants in the fund must not be probable of occurring
5 The fund itself must allow participants reasonable access to their funds
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by S 11 A Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans V ~ FSP AAG INV-1 and SOP 94-4-1 9
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
How Benefit Responsiveness Is Achieved
Benefit responsiveness is the ability of plan participants to transact at book value (principal plus accrued interest)
Benefit responsiveness is delivered by a stable value investment contract from a financially sound bank or insurance company that provides redemption at book value (principal plus accumulated interest) regardless of the level of market value
Stable value investment contracts are raquo Guaranteed Interest Contracts andother General Account Contracts raquo Separate Account Contracts raquo Synthetic G I Cs
Stable value funds may hold one contract type or some combination of these investment contracts
Stable value funds are defined by the Financial Accounting Standards Board in Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans FSP AAG INV-1 SVIAand SOP 94-4-1 10
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
How Benefit Responsiveness Works
Managed portfolio of high-quality fixed income securities
Investment Contracts
Stable Value Fund
bullThe book value investment contract provides preservation ofprincipal and a stable crediting rate
bullThe investment contract smoothes market volatility by amortizing gains and losses over the duration of the portfolio
bullThis smoothing is triggered through the rate reset mechanism and insulates against day-to-day volatility
Value I I Market Value of underlying
portfolio
Rising interest rates
FallingAsset interest
rates
Time o Wrap Value - Book Value - Market Value
SVIA 11
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
Benefit Responsiveness How Market Value and Book Value Converge
Fund Balance
$$
Market Value
Book Value
Crediting Rate Formula Smoothes the Portfolio Yield and Keeps Market and Book Value Close Together
MV(1+ytm) d= BV(1 + CR) d
The equivalent formula expressed in terms of CR is
CR =[(MVIBVyd x (1+ytm)]-1
1 Year 2 Years 3 Years Duration
SVIA 12
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
Characteristics of a Stable Value Portfolio
~ High credit quality fixed income securities raquo Portfolios will have an investment grade strategy raquo On average overall credit quality is AA or better duration is 400 years for $540 billion as
of December 31 2010
~ Broadly diversified raquo In general the exposure to any single issuer of investment securities typically
does not exceed five percent of fund assets
~ Balances duration with crediting-rate responsiveness raquo Crediting rates are 343 for $540 billion as of December 31 2010
~ Maintains a source of ready liquidity raquo Portfolios should be structured to provide sufficient liquidity when needed for
plan benefits
~ Each characteristic should be viewed and evaluated as a component of the total overall strategy employed
Source SVIAs Key Investment Management Principles for Stable Value Funds amp The 15th Annual SVIA Stable Value Investment and Policy Survey S V I A 13
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
-1gt -
-- 33~
Stable Value Funds Continue to be a Valued Investment
$500000
$450000 $423470 $404868
~ 1llO( 11 da~ ~--$400000 --
--$350000
1 l 1 __I
- 1 -- -- --
i
$300000 I i -- ~ -I ) middotmiddotic i0
-- 1 1~ -- j-- --) --~ ---- -- ---~ -- $250000
i I j~ en
t 1 __
L-j- 1__ middot1 i
-- I - --I -- --I --$200000 --lgtI I Ideg1 i1 L i__ ~
~I__~ -- j
$150000 -- --I -- -- -- j r
1 J bull -
( i __ II fL -- -- - --$100000
I i t~ j I
L [ I I i -jj I __rL-J ~ i i__ I -- -- I- -- ---$50000 -
I k j imiddot I$shy
200804 200901 200902 200903 200904 201001 201002 201003 201004 201101 2011 02 201203
F7~~1 Stable Value Assets -Crediting Rate
450
400
350
300 Q)-coc Cl250 c E C 200 Q)
U
150
100
050
000
SVIA Source SVIA Stable Value Quarterly Characteristics Survey through March 2011
14
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15
For more information
Stable Value Investment Association 1025 Connecticut Avenue NW
Suite 1000
Washington DC 20036
Phone 202-580-7620
Fax 202-580-7621
wwwstablevalueorg
SVIA 15