Stable Value? Chrysler Fund Shows Woes Still Lurking
It boggles my mind that there are companies that do not offer money market funds but do offer stable value funds as a “cash” investment option. In my previous engineering job (before a merger) the only cash option was a stable value fund. I complained to the company HR/401K department as well as to Fidelity Investments.
I was told to go away and ignored. With the merger the Stable Value Fund was going to be wrapped up. I hope that happened. I think any company in this situation is open to lawsuits.
My 2 cents: these products are incredibly safe. They are typically wrapped by too big to fail banks (BoA, JPM, RBC, WF, etc.) though some are wrapped by AIG.
Partly, the issue is that the participant has no clue who the wrapper is. Partly, the issue is that consumers don’t know what to expect.
SV Funds haven’t received a dime of aid from the government (unlike money markets) but still break the buck with extreme infrequency (unlike money markets!).
The typical SVF returned 4-5% last year. How many funds can say that as the equity market tanked 40-50%?
I hear your point, but I still think these are better options than money markets (and actually, many of the wrappers won’t wrap the funds unless the money market option is removed from the 401k portfolio as it offers a competing alternative which increases its own risk).