PlanSponsor Magazine writes "Money Market vs. Stable Value," which discusses "Considerations for fiduciaries" and the use of money funds and stable value options in retirement plans. The piece says of capital preservation options for defined contribution (DC) plans, "[B]oth of the most widely used options, money market funds and stable value accounts, have shown their weaknesses in recent years, so there is no compelling choice. The idea behind a capital preservation option is granting participants a shelter for their hard-won assets when conservatism is warranted -- such as during extreme market conditions -- or to accommodate a preference for steady asset values." It comments, "Of the 1,900 plans surveyed in 2015 for The Vanguard Group Inc.'s "How America Saves 2016," money market funds were present at 72% of plans and stable value accounts at 57%. In a 2016 client survey by consultants NEPC, however, 38% of plans offered money markets, 47% provided stable value, and 15% presented both. Although the two options hold similar positions at the conservative end of the investment risk continuum, their returns have been worlds apart.... [F]or the five years ended this past December, stable value accounts returned an annual average of 1.84% -- somewhat better than short-term high-quality bonds -- while money market funds earned next to nothing.... Those results are reflected in investors’ holdings: At year-end 2016, participants at recordkeeping clients of Aon Hewitt held 10.5% of their portfolios in stable value, versus just 2.1% in money market funds." The article adds, "In view of the significant and persistent differences in returns, it might seem logical that, over the last few years, sponsors would have substituted stable value accounts for money market funds, or at least increasingly offered them as a further option. An overt opportunity for such a switch arose last October, when new regulation on prime money market funds, which are offered by many DC sponsors, made them impractical.... But the move was not meant to be. Notwithstanding the better historical yields on stable value funds, sponsors remembered the challenges during the financial crisis. "Stable value accounts were hit by the one-in-a-million event, and the ratios of market value to book value dropped to the low 90% level across the board," Bremen recalls."

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