Stable Value products

Robert Serena

March 2021

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About the author – Robert Serena

Mr. Serena is a Risk Management and Actuarial executive with a very unique blend of
financial services functional experience across insurance, reinsurance, commodity
trading, and commercial banking - numerous technical and leadership roles in the First
Line-of-Defense (Actuarial, Investment Management, and Capital Markets & Trading)
and Second Line-of-Defense (Risk Management and Compliance).
He holds a BS in Electrical Engineering from Rice University, an MS in Operations
Research from the University of New Haven, and several professional certifications –
Fellow in the Society of Actuaries (FSA), Chartered Financial Analyst (CFA), Financial
Risk Manager (FRM), Chartered Property Casualty Underwriter (CPCU), and Certified
in Risk and Information System Control (CRISC).
He currently lives in Charlotte, North Carolina with his wife and two children.
Contents
Section 1.0 – Executive Summary ..................................................................................................... 4
Section 2.0 – Different types of products ........................................................................................ 4
2.1 Executive Summary .................................................................................................................... 4
Section 3.0 – Key Product Features – Crediting Rates................................................................ 7
3.1 Executive Summary .................................................................................................................... 7
Section 4.0 – Risk Management considerations ........................................................................... 8
4.1 Executive Summary .................................................................................................................... 8
4.2 Product Issuer .............................................................................................................................. 8
4.3 Plan Sponsor ................................................................................................................................ 9
5.0 Historical Performance ................................................................................................................ 10
6.0 Plan Sponsors - Factors to consider ....................................................................................... 10
Appendix A – Terms of Reference .................................................................................................. 12
Appendix B – Architecture of a commingled Stable Value Fund ............................................ 14
Appendix C – Stable Value, Money Markets, and Short-Term Bonds ................................... 15

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Section 1.0 – Executive Summary
Stable Value products are investment products that are offered to retail investors through employer-
sponsored retirement plans, specifically Defined Contribution (DC) plans - 401k, 403b, 457, etc. While
some variants of Stable Value products are regulated as insurance products, they are not sold directly
to retail customers on an individual basis. They are strictly sold as group contracts to firms that provide
DC plans to their employees.
Stable Value products have been used in corporate DC plans for ~40 years, and offer investors a
conservative, guaranteed alternative to money market funds and other low duration, short-term bond
funds. Stable Value products are typically offered as the capital preservation option in a menu of DC
plan investment options, often to include bond funds, equity funds, Real Estate Investment Trusts
(REITs), alternative asset funds, brokerage accounts, etc. More recently, Stable Value products have
also been used as a component in lifestyle or target date funds. Target Date Funds are designed to
automatically reallocate assets to more conservative investment options as a participant ages. Exhibit
1 below illustrates the evolution of the Stable Value market over the past 40 years.
EXHIBIT 1- Evolution of the US Stable Value market over the period 1979 to 2019
Time period Market evolution
Late 1970s • Stable Value products first used in late 1970s with the advent of the 401k plan in 1978.
• Used as investment options in DC plans.

Late 1980s • Several insurers that were large issuers of General Account GlCs went bankrupt, leading to
Early 1990s investors suffering losses - Mutual Benefit and Executive Life.
• This resulted in a move towards non-insurance providers - banks and asset management firms - for
GIC products.

2000 to financial • Before the financial crisis, Stable Value Assets Under Management (AUM) > 500 billion.
crisis • Stable Value products viewed as a "safe harbor" after the financial crisis.
• Reallocation flows to Stable Value products increased.

2010 • Stable Value AUM > 560 billion.

• Stable Value products used in 50% of DC plans offered in the US.

2016 • Stable Value AUM > $800 billion.

• 50% increase in the number of wrap issuers since 2009.
• Banks withdrew from wrap guarantee market.
• Large insurance firms have stepped into to replace wrap capacity provided by banks pre-2008.

2019+ • More investors looking for capital preservation options in light of equity market volatility and
increasing interest rates,
• More employer plans offering Stable Value funds as component of lifestyle or target date funds.
• Continued focus by fund providers on building cost-effective administrative capability and top-notch
portfolio management capability.

Section 2.0 – Different types of products

2.1 Executive Summary
Stable Value products are a combination of (1) A guaranteed investment accumulation product with (2)
A book value guarantee . The book value is defined as the sum of (1) Any plan and/or participant
deposits (initial and recurring), less (2) Any plan and/or participant partial withdrawals, plus (3) All
accumulated interest credits . The funds deposited into a Stable Value plan are typically invested in a
conservative fixed income portfolio. The book value guarantee, or wrap feature, essentially comes into
play in those scenarios where an individual participant is withdrawing some or all of their account
balance, and the market value of the supporting fixed income portfolio has fallen below the book value.
The scenario where the Market Value < Book Value can occur due to 2 types of event risks - (1) Market
Risk - Adverse interest rate moves and (2) Credit Risk - Some portion of the issuers in the fixed income
portfolio have defaulted.
It is important to note that the typical "book value guarantee" (aka wrap feature) is offered only to the
individual participants in a Stable Value plan, not the plan sponsor. The wrap feature is designed to
spread the risk of multiple, independent participant withdrawals over the entire base of plan participants
without adversely impacting those remaining participants.
The wrap feature is not designed to protect against corporate-level events - early retirement programs,
mass layoffs, bankruptcy, line of business spinoffs, etc. - these event types could result in large scale
liquidations such that the fund is unable to pay out each withdrawing participant at book value. Plan
sponsor-initiated withdrawals are subject to a plan's discontinuance provisions. Exhibit 2 below
illustrates the components of a stable value portfolio.
Exhibit 2 - Components of a Stable Value portfolio

There are two critical dimensions along which Stable Value Products are characterized - (1)
Contract type and (2) Organizational structure of the fund. There are 3 different contract types,
and these are summarized in Exhibit 3 below, and the 2 different organizational structures are
summarized in Exhibit 4 below.
EXHIBIT 3 – Different types of underlying contract types
Contract Type Description
Guaranteed lnvestment Contract • This product type is a “turnkey solution” – the issuing insurer provides the recordkeeping, the
(GICs) – lnsurer General Account wrap guarantee, portfolio management expertise, and the investment product.
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 • Backed by the general account of the issuing insurer. Issuing insurer owns the underlying
assets.
• The underlying product is a group annuity issued by the insurer. This type of product is
regulated as an insurance product by US state insurance regulators.
• The "pricing" exercise consists of setting the crediting spread (e.g. credited rate= gross
earned rate - crediting spread) to achieve target profitability and capital levels.
• There is typically a minimum guaranteed credited rate in the range {1.00%, 3.00%} that may
be periodically reset based upon the prevailing interest rate environment.
• Less overall transparency on fees as compared to Separate Account GICs and Synthetic
GICs.
• In the event of an insurer insolvency, plan participants would have equal creditor standing to
other policyholders of the insurer (ahead of general creditors).
• No separately identifiable investment portfolio.

Guaranteed Investment Contract • Backed by the underlying assets in the separate account and the issuing insurer's general
(GICs) – Insurer Separate account.
Account • The underlying product is a group annuity issued by the insurer. This type of product is
regulated as an insurance product by US state insurance regulators.
• Assets are held in legally separate account and are insulated from claims against the issuing
insurer's general account. The issuing insurer owns the assets.
• The return on the Stable Value product may be fixed, indexed, or based on the actual
performance of the underlying assets.
• ln the event of insurer insolvency, plan participants would have a more senior creditor
standing than under the General Account GIC against the separate account assets.
• Separately identifiable investment portfolio.

Synthetic GICs • Assets owned by the sponsoring employer plan rather than the issuing insurer.
• This attribute eliminates any creditor standing issues in the event of the issuing insurer's
insolvency - a trust established for the benefit of the plan sponsor owns the assets directly.
• Different than traditional GA GICs in that the underlying investment and the wrap guarantee
are decoupled.
• These products are a combination of professional investment management and a book value
guarantee.
• Actual performance of the underlying credited rate varies over time.
• If the plan voluntarily discontinues the contract, the typical contract will be structured to pay
out the market value or book value over an amount of time equal to the duration of the
underlying fixed income portfolio.
• Separately identifiable investment portfolio.

EXHIBIT 4 – Summary of different organizational structures

Type of structure Description
Pooled or Collective • These funds commingle deposits from many underlying plans.
Investment Trust Funds • CITs typically utilize multiple underlying product types (e.g. Traditional GICs, synthetic/SA
(CITs) GICs) as funding vehicles, all combined with a cash cushion to meet overall liquidity needs.
• The wrap feature is typically provided by one or more banks and insurance companies and
protects against loss of principal due to interest rate volatility.
• But oftentimes, there is not a formal contractual guarantee against capital loss.

Individually Managed • Designed and used for a single plan client or a group of related clients.
Accounts • This product can utilize one or more investment managers and one or more wrap contract
providers.
• The interest crediting methodology is only impacted by the cash flows of the participants in
the plan using the fund, not by the cash flows of participants in unrelated funds.
• Plan discontinuance is typically paid out in an amount equal to the market value or the book
value of the underlying assets over time.
Section 3.0 – Key Product Features – Crediting Rates
3.1 Executive Summary
One of the most critical attributes of Stable Value plans is the crediting rate . The crediting rate
ultimately determines the return of each individual participant in a given plan, and depends on
several variables - weighted yield-to-maturity of the underlying asset portfolio, portfolio duration of
the underlying portfolio, the reset frequency for the credited rate, the investment management fee
for the fund, the wrap fee for the fund, and finally, the ratio of the market value to the book value
of the underlying portfolio on the reset date.

In the abstract, the equation expressing this relationship for a Stable Value plan follows:

MVA d
• GrossCreditingRatet = GCR t = {((1 + Y − IMF)X ( BVL ) − 1)} + A

• Y=the annualized market-value weighted yield to maturity (YTM) or yield to worst (YTW) in the
separate account as of the valuation date.
• IMF = the investment management fee.
• MVA = the market value of separate account assets attributable to the contract as of the
valuation date.
• BVL = the book value of the liabilities (participant account value) account as of the valuation
date.
• D = the portfolio duration as of the valuation date.
• A = any adjustments mutually agreed between the SV product issuer and the contract owner.
• NetCreditingRatet = NCR t = GCR t − Wrap Fee
• The wrap fee is charged by the firm providing the guarantee to the individual policyholders in
the contract.
The interpretation of this formula is that the application of the net crediting rate to the
participant's balance will provide for the book value to converge to the market value of the
corresponding assets over a time period equal to the portfolio duration at that point in time. The
formula makes a simplifying assumption that the underlying bond portfolio will remain stable
(no maturities or sales) and the portfolio YTM will remain constant. The operation of the
formula essentially " amortizes" any market value surpluses/deficits (relative to book value) over
the duration. The simplifying assumption that the underlying bond portfolio will remain static
over the duration horizon may or may not be realistic depending on the nature of the actual
portfolio, and so the NCR formula has a built-in self-correction mechanism when it is revalued
on every scheduled reset date.

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Exhibit 5 below illustrates the directional response of the net crediting rate to different directional
movements in the independent variables (e.g. YTM, MV-to-BV ratio, duration, etc.).

EXHIBIT 5 - Relationship between Net Crediting Rate and input variables

Change in independent variable Impact on NCR (all other variables static)
YTM increases NCR increases
YTM decreases NCR decreases
Portfolio duration increases NCR increases
Portfolio duration decreases NCR decreases
MV-to-BV ratio increases NCR increases
MV-to-BV ratio decreases NCR decreases

Section 4.0 – Risk Management considerations

4.1 Executive Summary
There are different risk management perspectives to consider when evaluating a Stable Value product
- (1) The firm issuing the underlying Stable Value products (and potentially the wrap guarantees), and
(2) The Employer-sponsored plan.
4.2 Product Issuer
The most material risk factors confronting any issuer of Stable Value products (typically banks or
insurers) are financial risks - (1) Interest rate risk, (2) Liquidity risk and (3) Credit Risk. Following are
examples of how these risks present to the issuing firm:
Interest Rate Risk (Crediting strategy)
• Stable Value products are characterized by two types of credited rates that are reset periodically -
(1) Current credited rates (based on new money or portfolio earned rates) and (2) Minimum
guaranteed credited rates.
• The insurer earns a given rate (e.g. the gross earned rate) on its supporting asset portfolio, subtracts
a crediting spread that covers the expenses, risk and capital margin, and profit margin, and then
credits each participant with the net rate on their respective account value. This periodic resetting
of the crediting spread represents the "pricing" exercise for Stable Value products.
• Setting the crediting spread is considerably easier in a moderate to high interest rate environment
on account of the insurer having sufficient flexibility in setting the crediting spread to balance
profitability with product competitiveness.
• However, the pricing exercise becomes more challenging in a lower interest rate environment, as
has been the case in the US since the 2008 financial crisis. If at any time the gross rate the insurer
earns on its portfolio is below the contractual minimum guaranteed rate, then the insurer faces a
loss on each dollar of account value.
Interest Rate Risk/Liquidity Risk (Capital losses due to lapses)
• In an environment where interest rates are increasing, the propensity of the plan sponsor to
voluntarily lapse their contract and transfer all of the funds under that contract to another Stable
Value provider increases.
• This presents the issuer with interest rate risk to the extent that the Stable Value fund consumes its
liquidity buffer and requires the liquidation of assets from the supporting asset portfolio. If the assets
 in the portfolio were initially purchased at lower yields than the current market yields, then the issuer
may incur capital losses from liquidating those assets. Additionally, the fund may have to draw on
outside liquidity sources to fund these lapses.
• Stable Value product issuers typically manage (1) Interest Rate Risk through the mechanism of
Market Value Adjustments (MVAs) on any plan lapses and (2) Liquidity Risk through the mechanism
of Discontinuance provisions in the contract.
Credit Risk - Bonds Defaulting
• The assets supporting a portfolio of Stable Value products are typically invested in a diversified fixed
income portfolio.
• If a material portion of the underlying bonds defaulted, then the fund would face a potential liquidity
crunch if large numbers of participants withdraw their account balances at the same time.
• The fund would have to realize a capital loss on the bonds that it sold, thereby leading to the potential
need to tap alternative liquidity sources to fund participant withdrawals.
4.3 Plan Sponsor
As mentioned above, the "natural buyer" for a Stable Value product are employers that offer employees
various retirement plan options, including DC plans with a menu of investment options. Employers that
are evaluating different Stable Value product offerings are confronted with multiple risks - (1) Interest
Rate Risk, (2) Credit Risk, (3) Operational Risk, and (4) Legal Risk.
Interest Rate Risk - Portfolio impacts
Similar risk profile to the product issuer - Depending on the portfolio duration, increasing interest rates
Market Value of Assets
typically result in declining market values, which in turn increase the risk of the Book Value of Liabilities ratio
decreasing below 1 at time when large numbers of policyholders are looking to withdraw funds.
Credit Risk - Bonds defaulting, Wrap providers defaulting.
The plan sponsor should have a good understanding of the distribution by credit rating class of the
investment portfolio. Additionally, the sponsor should carefully evaluate the financial strength of the
firms providing the wrap guarantee. Ideally, the Stable Value funds into which the plan sponsor is
considering an investment should have multiple wrap guarantee providers, all of whom have top
financial strength ratings from the various rating agencies (S&P, Moody’s, AM Best, Fitch, etc.)
Operational Risk
This relates to the risk profile presented by the firms that provide the administrative support to a Stable
Value fund, particularly the record-keeping firm. The administration system maintained by the record
keeper will contain highly sensitive information about plan participants - name, address, salary, social
security number, employer name, job role, contribution levels, etc. The record-keeping firm must have
a robust information risk management program in place to ensure that participant information is
protected and the firm adheres to all relevant regulation/legislation.
Legal Risk
The plan sponsor could be classified as a "fiduciary" under ERISA or other regulations that apply to the
management of Defined Contribution plans, and this classification carries significant oversight and
compliance responsibilities. If any one of the above specified risk management events were to occur -
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product not meeting its return guarantees, product issuers defaulting, data breach occurring at a record
keeper - the plan sponsor could potentially face significant legal liability.

5.0 Historical Performance

A useful mechanism to illustrate the value of including a stable value fund option in a DC plan is to use
actual, historical data from other asset classes – broad equity index (S&P 500), broad bond index
(Vanguard Intermediate Bond Index Fund), and individual equity (Cisco common stock) – and compare
the results from investing $10,000 in each of these assets vs. in stable value funds with different
credited rates. Exhibit 6 includes price data from the period 12/31/2008 through 03/31/2020, and so
captures part of the 2008/2009 financial crisis and the Q1 2020 market drawdown due to the
coronavirus. The first 3 curves in the legend illustrate what would have occurred in a stable value fund
assuming 3 different levels of credited rates – 2%, 5%, 10%.
These rates are purely indicative of the relative differences in volatility between the different asset
classes – as one would expect, if we visually rank the different curves by volatility, we get Cisco
common > S&P 500 > Vanguard Intermediate Bond > various stable value options. The purpose of this
graph is not to suggest that a stable fund investor would receive the same credited rate for 11 years
and 3 months – that is very unlikely to happen. But it does reinforce the value proposition that a stable
value option can offer an investor principal stability, a competitive and predictable return, and can
further serve to diversify that investor’s holdings.
Exhibit 6 – Illustration of $10,000 invested on 12/31/2008.
Value of $10,000 investment made on 12/31/2008
$35,000

$30,000

$25,000

$20,000
Fixed Rate - 2%
Fixed Rate - 5%
Fixed Rate - 10%
$15,000 S&P 500 Index
Vanguard Intermediate Bond Index Fund
Cisco - Common Stock
$10,000

$5,000

$0

6.0 Plan Sponsors - Factors to consider

A plan sponsor must evaluate many factors when choosing 1 or more Stable Value plans to include
in their Defined Contribution plans:
• Investment Portfolio - Composition and risk profile
• Experience level of the investment manager with the underlying securities.
• Distribution by fixed income class and credit rating class.
• Interest rate sensitivity of the underlying securities (e.g. duration & convexity).
• Forward-looking investment strategy - Does the fund adhere to a detailed Investment Policy
Statement?
• Wrap or book value guarantee?
• How much does it cost and under what conditions does it come into play?
• Financial strength of the firm underwriting the guarantee and the likelihood of that firm not
being able to meet their obligations.
• It is important to note that a wrap typically does not guarantee against the default of one or
more of the underlying fixed income investments. The wrap only protects the plan
participants against interest rate risk.
• Withdrawal and termination provisions of the fund
• There are three discrete types of "withdrawal events" in a Stable Value fund - (1) Participant
initiated, (2) Plan - sponsor initiated, and (3) Partial or Full Discontinuance.
• The book value guarantee applies to participant-initiated events, not the plan sponsor-
initiated events or discontinuance events.
• Plan sponsor-initiated events and discontinuance events typically involve a market-value
adjustment.
• Examples of discontinuance events:
• Employer terminates one or more DC plans.
• Employer spins off a line of business or operational division.
• Employer shutters a line of business and lays off a large percentage of the employees in the
division.
• Employer implements a large-scale early retirement offer to employees.
• Fund Provider Expertise
• Established track record in the market.
• Level of Assets Under Management and market share.
• Financial Structure of the product
• How are credited rates determined?
• Level of fees in the contract - wrap fees, investment management fees, record-keeping,
audit fees, etc.
• Organizational Structure of the fund
• Are the service providers (e.g. consultants, record keepers) separate from the product
issuers? If so, do they have the requisite expertise and performance record?
• Is the fund commingled with other employer plans, or is your plan stand-alone?

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 Appendix A – Terms of Reference
Term Description
Account Value The accumulated value of an individual participant's deposits, withdrawals, and interest credits in a
stable value product.

Benefit Responsive A term used to describe investments that guarantee contract value (or book value) even when the fair
market value of the underlying assets is more or less than contract value. This means that, in the event
that an individual retirement plan participant withdraws money from a Stable Value contract, that
participant is guaranteed to receive their respective contract value.

Book or Contract Value The sum of (1) Deposits + (2) Interest credits – (3) Withdrawals. The book value is not subject to
market value fluctuations.
Competing Fund Rule Pertains to the equity wash feature – “competing funds” are defined to be any type of fixed income
investment vehicle with a duration of < 3 years that is a natural competitor for a stable value fund.
This could include money market funds and variants of low duration/short-term bonds funds.

Credited Rate The interest rate applied to an individual participant's account value. The account value grows over
time with interest credits and additional deposits.

Discontinuance The event of the complete termination of a stable value contract by the sponsoring employer.

Equity Wash The requirement that an individual participant in a Stable Value fund must wait a set period of time
Feature (e.g. 90 days) before investing withdrawn funds into a “competing fund”.

Guaranteed Investment A group annuity contract that pays a specified rate of return for a specific period of time and offers book
Contract value accounting.

Market Value A contractual mechanism that applies only to plan-level (not participant-level) withdrawal or
Adjustments discontinuance events. In the event that a plan sponsor wishes to withdraw a large portion of their
invested balance in a stable value product, and further the market value of the supporting assets are
below the book value at the time of the withdrawal request, the product issuer may require the assets
to be market value adjusted, or liquidated at a level in the corridor between {Market Value, Book
Value}.

Money Market A type of mutual fund that invests only in fixed income instruments that are characterized by several
Mutual Fund attributes - high credit quality ratings, low level of interest rate sensitivity, and high liquidity levels.

Pricing Spread Applies specifically to General Account GICs and represents the differential between the gross rate
earned by the issuing insurer on its investment portfolio and the credited rate that it pays to plan
policyholders. The pricing spread, and in turn the credited rate, is reset on periodic basis, and must be
sufficient to cover (1) Fixed and variable expenses, (2) Risk and capital charges, and (3) Profit margin for
the issuing insurer.

Put Provision Refers to a contractual provision that allows for a plan sponsor to withdraw from a stable value fund
at book value over a specified period of time, typically 12 months.

Qualified Default A term that applies to the adoption by DC plan sponsors of automatic enrollment plans (AEPs). Plan
Investment Alternative sponsors that implement AEPs have to meet specific requirements in the investment options that are
(QDIA)1 offered under the AEP. Such investments are called Qualified Default Investment Alternatives
(QDIAs), and there are 4 types of QDIAs:
• A product with a mix of investments that takes into account the individual’s age or retirement
date (an example of such a product could be a life cycle or targeted-retirement-date fund).
• An investment service that allocates contributions among existing plan options to provide an
asset mix that takes into account the individual’s age or retirement date (an example of such a
service could be a professionally managed account).
• A product with a mix of investments that takes into account the characteristics of the group of
employees as a whole, rather than each individual (an example of such a product could be a
balanced fund); and

1
SOURCE: Department of Labor website
 • A capital preservation product for only the first 120 days of participation (an option for plan
sponsors wishing to simplify administration if workers opt-out of participation before incurring an
additional tax).

Qualified Retirement An employer-sponsored retirement plan, the legal basis of which is codified in Section 401(a) of the
Plan United States Tax Code. Within certain limits, the funds that an employer contributes to qualified
plans are tax-deductible on that employer's corporate income tax. Additionally, the funds that an
individual employee contributes to a qualified plan are tax-deferred until withdrawn in retirement by
the employee.

Record Keeper Firm that tracks participant transactions and account balances in defined contribution plans. Can be the
firm issuing the underlying Stable Value product or a specialist firm. See Appendix B for one possible
structure of a commingled stable value fund.

Stable Value Fund A fund that invests in a portfolio of conservative, highly rated fixed income investments that is insured to
protect the investor against a decline in yield or a loss of capital. The owner of a stable value fund will
continue to receive the agreed-upon interest payments regardless of the state of the economy.

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Appendix B – Architecture of a commingled Stable Value Fund
 Appendix C – Stable Value, Money Markets, and Short-Term Bonds
Characteristic Stable Value Money Market Short-Term Bonds
Accounting Treatment • Book value. • Amortized cost. • Market Value.

Credit Risk Profile • Typically low due to tight • Typically low due to tight • Depends on investment
restrictions on distribution across restrictions on distribution mandate of fund.
credit ratings. across credit ratings. • Only subject to bond
• Credit risk is two-fold – (1) • Only subject to bond issuer default.
Default of bond issuers and (2) issuer default.
Default of wrap issuers.

Embedded Optionality • Wrap fee provides downside • May invest in individual • May invest in individual
protection to individual bonds with put or call bonds with put or call
policyholders. features. features.
• No fund-level wrap • No fund-level wrap
guarantee feature. guarantee feature.

FDIC or other • No • No • No
government guarantee?
How are products sold? • Only available as a group • Offered on both a retail • Offered on both a retail
product through employer- and institutional basis. and institutional basis.
provided retirement plans.
• Not offered on a retail basis to
individual investors.

Interest Rate Risk • Duration in the range 2 to 5 • Low duration due to • Relatively low duration
Profile years. maturity restrictions (<=60 due to investment
• Wrap feature protects against days). restrictions (maturities < 3
adverse interest rate moves. years).
• Movements in credited rate lags
interest rate moves (up or
down).

Investment Strategy • Principal preservation, stable • Principal preservation, • High current income
return, highly liquid. stable return, highly liquid. • Less liquid than money
market funds..
Withdrawal events • Policyholders – At book value • At Net Asset Value (most • At Net Asset Value.
(deposits + interested credited – MM funds strive to
withdrawals). maintain a NAV =
• Plan sponsor – Book value $1/share.
withdrawals does not apply to
withdrawals or discontinuance.

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