"Stable-value wrap coverage disappearing" writes Pensions & Investments. The article says, "Wrap capacity for stable value funds has evaporated, leaving DC plan executives scrambling to find insurance for new assets flowing into these funds as many wrap providers are under financial pressure." P&I quotes Edward Lilly, executive director of the New York State Deferred Compensation Plan, "The marketplace for wrap coverage has completely dried up." The piece explains, "`Wraps are contracts provided by insurers, banks or other financial companies that protect stable value funds' bond portfolios from wild swings in interest rates, guaranteeing participants will receive the funds' book value even if the market value falls. They are used by stable value managers and sponsors of plans that offer stable value as an investment option.... One area of concern: The market value of underlying securities has fallen in many stable value funds, increasing the pressure on wrap providers to make up the difference. The average stable value fund tracked by research firm Hueler Analytics Inc., Minneapolis, had a market value that was 95.6% of its book value as of March 31, compared with 99.4% at the end of 2007, said President Kelli Hueler."
