2022 Stable Value Study

MetLife's study focuses on stable value as a capital preservation option, and also broadens the scope of stable value's volatility reduction.

In this study

• How prevalent is stable value as a capital preservation option?
• How are plan sponsors helping near retirees and retirees protect their retirement savings?
• How concerned are plan sponsors about market volatility, particularly for target date fund (TDF) investors?
  

Stability Valued

Stable value has long been a cornerstone of 401(k) and other workplace retirement plans. In fact, stable value is the only capital preservation option designed specifically for qualified retirement plans. 

The 2022 Stable Value Study^SM revisits plan sponsors’ selection of stable value as a capital preservation option, as well as the frequency with which advisors recommend stable value to their plan sponsor-clients. The study also reviews perceptions about stable value’s performance, including how it compares to that of money market funds. MetLife also focuses on the views of DC plan sponsors and advisors about the tradeoffs between return and risk and, as TDFs increasingly dominate DC plan investment lineups, the potential of stable value to optimize risk/return in the TDFs they offer.

Interest Is Aligned On Features That Can Reduce Volatility And Enhance Returns

When plan sponsors were asked about their level of concern regarding the ability of DC plan participants to mitigate the impact of market volatility, many expressed concern — particularly for those already retired or approaching retirement.

Although few TDFs today include strategies to reduce volatility with the ability to enhance returns, which are principles of stable value, there appears to be significant interest in features that can do both.

If a TDF provider could generate net returns four times more than the cost associated with delivering those incremental returns while keeping volatility constant, 89% of plan sponsors and 97% of advisors would be interested in this feature. There is also significant interest—86% of plan sponsors and 94% of plan advisors—in a feature that could maintain comparable returns, net of fees, while reducing volatility by approximately 40%.

Conclusion

Stable value will continue to be a mainstay of DC plans. And, as the DC plan marketplace has moved to more of a set-it-and-forget-it approach with TDFs, so too has the ability for the longstanding volatility smoothing principles of stable value to be applied in creative ways for those TDFs. This approach enables TDF providers to optimize the risk/return profile of their TDFs for the benefit of plan participants. Whether stable value is used as standalone DC plan capital preservation option or as a tool to manage volatility in target date funds, one thing is certain: DC plan participants will be well positioned to achieve retirement income security.