MetLife released a "2015 Stable Value Study," which surveyed retirement plan sponsors, stable value fund providers and investment advisors, who, unsurprisingly, predicted that stable value funds will take market share from money market funds in the coming years. The study's introduction explains, "Stable value funds have played an important role in defined contribution (DC) plans for many years, and we believe that they have an equally important -- if not greater -- role to play in the years ahead. Stable value is the most widely used safe option by asset volume." (ICI's last study on "401(k) Plan Asset Allocation" shows that among the approximately 53 million workers with $4.2 trillion in these retirement plans, about 7% ($294 billion) is in GICs and Stable Value funds and about 3% ($126 billion) is in money market funds.)
The MetLife study claims, "Stable value offers significantly higher returns than alternatives in the capital preservation space, with less risk. It is this combination that makes stable value options popular among plan participants. Most DC plans offer a stable value option. Industry estimates of the percentage of DC assets allocated to stable value range from 17 to 37 percent. According to the Stable Value Investment Association (SVIA), over $700 billion is allocated to stable value options."
It continues, "New in this year's study are comparisons to the other main capital preservation option, money market funds, with special attention to why one is chosen over the other. The survey explores familiarity with recent regulatory and legal cases applicable to money market funds as plan options. It also examines the degree of awareness of how stable value performance compares to money market performance, and how the performance of each compares to the rate of inflation. Finally, it assesses the extent to which plan sponsors and their advisors are reconsidering the appropriateness of money market as a capital preservation option, and it looks at emerging uses of stable value in the DC space."
The study's "Principal Findings" include: Most plan sponsors (82%) surveyed for this study currently offer stable value funds as an option within their DC plans. Close to half of plan sponsors (45%) have both stable value and money market funds in their lineup, while relatively few plan sponsors (18%) offer money market but not stable value funds; and, Small plans with fewer than 100 plan participants are more likely than larger plans to offer money market (76% vs. 58%) either as a stand-alone option or alongside stable value."
MetLife's press release, entitled, "Stable Value Increasingly Recognized as a More Attractive Capital Preservation Option for Defined Contribution Plans," says, "A vast majority (82%) of defined contribution (DC) plan sponsors who are familiar with the U.S. Securities & Exchange Commission's (SEC) amendments to the rules governing money market funds (MMF) feel that stable value is a more attractive capital preservation option for plan participants, according to MetLife's 2015 Stable Value Study, released today. Additionally, most stable value fund providers and advisors -- interviewed for the study and familiar with MMF reforms -- predict that the use of money market funds in defined contribution plans will decline over the next few years."
It tells us, "The leading reason that plan sponsors give for offering stable value is to provide a capital preservation option (65%); guaranteed rate of return (50%); and, better returns compared to money market and other capital preservation options (49%). Among plans with more than 100 participants that added stable value in the past two years, 77% offer stable value because it offers better returns than money market and other capital preservation options, up significantly from 38% in the MetLife 2013 Stable Value Study."
Thomas Schuster, VP and head of Stable Value and Investment Products with MetLife, comments, "Stable value has a 40-year track record of performing exceptionally well -- no matter what the market conditions. Educating plan sponsors and participants about the advantages of stable value will not only help move plan assets to stable value, but will also help retain assets in qualified retirement plans, offering participants enhanced retirement income security."
MetLife says, "When it comes to stable value's performance against money market funds, the Study found that almost half of sponsors (47%) are unaware that stable value returns have outperformed money market returns: 22% believe that stable value and money market returns have been about equal and 21% don't know how the returns compare. Additionally, 4% actually believe that money market funds have performed better than stable value over this time period."
Warren Howe, national director of Stable Value Markets for MetLife, states, "Two rounds of reforms have reduced money market's expected returns and made them less customer friendly. The reforms have also highlighted the fact that money market funds are designed for general retail use. In contrast, stable value funds, which are designed specifically for employer-sponsored plans, are uniquely structured to maximize returns while preserving principal."
Finally, the release adds, "To conduct the research, MetLife engaged Greenwald & Associates and Asset International, Inc., publishers of PLANSPONSOR and PLANADVISER magazines. Three separate studies were conducted -- an online survey of 205 plan sponsors conducted in June 2015, as well as in-depth phone interviews with 20 stable value fund providers and nine advisors during July 14 to August 28, 2015. Assets under management for plans included in the study ranged from under $10 million to $2.5 billion or more."
