cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Bluedevil156
Follower ○○

Intermediate Bond vs Stable Value (+/-)

Hello

Considering a reallocation of a portion of my bond mutual fund portfolio to stable value.  Not very familiar with SV category and it does not appear to be a M* screener category. 

Would appreciate your insight into Stable Value funds, What are some good ones, how does performance compare with bonds,   what is SV funds correlation to bonds and equities.

As always, all comments are appreciated

BlueDevil - 156

0 Kudos
7 Replies
JRinNY
Participant ○

Re: Intermediate Bond vs Stable Value (+/-)

Stable Value is only available in 401K. It's usually high-quality bond portfolio wrapped in insurance contract guaranteeing its value. The price of the wrapper is usually negotiated by the plan sponsor and is part of the expense. Intermediate Bond funds will fluctuate with interest rates and credit changes.

0 Kudos
yogibearbull
Valued Contributor

Re: Intermediate Bond vs Stable Value (+/-)

Stable-value funds guarantee principal and interest accumulations and the guarantee is by an insurance company [except for the TSP G Fund that is guaranteed by Uncle Sam].

Prefer SV if the current interest crediting rate [that can vary] exceeds the 30-day SEC yield of the bond fund under consideration. This is because the 30-day SEC yield is the potential future total return of the bond fund, and if it is lower than the current interest crediting rate of the SV, then why bother with it.

All rules of thumbs have exceptions and 2019 was an exception due to several Fed rate cuts that weren't even expected at the beginning of 2019.

YBB
0 Kudos
Bluedevil156
Follower ○○

Re: Intermediate Bond vs Stable Value (+/-)

Thank you YB!

Sent from my iPhone
0 Kudos
chang
Valued Contributor

Re: Intermediate Bond vs Stable Value (+/-)

It seems strange that 401ks with a decent SV option often also have a MM option. The SV almost always yields more than the MM.

The better comp to an SV would be a ST or Ultra-ST fund. Right now it’s odd but UST funds with very short durations are yielding nearly the same as ST funds. VUSFX is a good example.
0 Kudos
yogibearbull
Valued Contributor

Re: Intermediate Bond vs Stable Value (+/-)

T-Bill rates are nearly flat although 52-wk T-Bill rate is a bit lower that shorter maturities. So, very short-term Treasury funds are beating/matching short-term Treasury funds.

SVs in 401k/403b pay higher than money-market funds because SVs are intermediate-term portfolios with insurance guarantee wrappers. There are restrictions in the background [so that the insurance company doesn't lose money] but those don't affect holders in daily operations. These restrictions are not possible outside of 401k/403b and that is why SVs are not found outside of 401k/403b.

YBB
0 Kudos
SandyinBoca
Follower ○○○

Re: Intermediate Bond vs Stable Value (+/-)

When I created my small company 401k, the sponsor required that MM and any other cash equivalent be deleted as an option before SV could be added to the platform. The insurance company (Met Life) wanted to be the only cash option in order to allow us to participate. I took it gladly although I always drool when TIAA participants speak of their SV funds which have way higher, and guaranteed, percentage payments than mine.

0 Kudos
yogibearbull
Valued Contributor

Re: Intermediate Bond vs Stable Value (+/-)


@SandyinBoca wrote:

When I created my small company 401k, the sponsor required that MM and any other cash equivalent be deleted as an option before SV could be added to the platform. The insurance company (Met Life) wanted to be the only cash option in order to allow us to participate. I took it gladly although I always drool when TIAA participants speak of their SV funds which have way higher, and guaranteed, percentage payments than mine.


Details vary, but when there are both SV, m-mkt funds and bond funds are available in institutional 401k/403b, there are equity-wash rules in place. These require going through equity exposure before movement among SV and FI alternatives.

As for the SV-like TIAA Traditional [it existed even before the term SV came into being], TIAA has the advantage of offering it in-house rather than relying on a 3rd party insurance company. What puzzles me who stand behind the SVs offered by fund companies [Vanguard, etc]. I once wrote to Vanguard about this and its response was it is just very cautious and careful for SV investments and ignored my question whether it or someone else stands behind its SV.

YBB
0 Kudos
Announcements

To learn more about the recent changes to Morningstar.com, please see the updated FAQ.

See recent posts and all our forums or access the old forums here.
 

You can read the community guidelines in