Stable value

November 21, 2019

Stable value funds are fixed income funds that attempt to ensure preservation of principal while providing a higher yield than cash or money market funds.

This feature makes them widely used among participant-directed defined contribution plans. Though they offer several advantages, including low volatility and daily transactions at book value, they are not without drawbacks, including guarantee provider default and liquidity risk. Generally, only more conservative investors or investors with short term time horizons should consider stable value funds, as longer-term investors should be willing to accept higher interim volatility in exchange for added return, lower costs, and lower total portfolio risk.