Stable value funds with tickers?
Stable value funds with tickers?
Are all stable value funds proprietary (i.e. no ticker to look up their history)? I was trying to find some ticker symbols so I could use them in a portfolio backtest but came up empty.
Other than the high expense ratio, would something like MINT be a good proxy?
Or is there an index than many of them track?
If there are none that are traded, does anyone have a feel for a collection of ETFs or mutual funds you'd assemble to "roll your own" stable value fund and what weightings?
Other than the high expense ratio, would something like MINT be a good proxy?
Or is there an index than many of them track?
If there are none that are traded, does anyone have a feel for a collection of ETFs or mutual funds you'd assemble to "roll your own" stable value fund and what weightings?
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Re: Stable value funds with tickers?
Stable value funds are not index funds and there are almost no publicly traded ones anymore plus you can't really roll your own because you can't buy the insurance wrappers so the closest most get are CDs or I bonds or the like.
- Phineas J. Whoopee
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Re: Stable value funds with tickers?
Inherent in all stable value funds is an insurance component. Insurers pool risk. No individual can pool their own risk with h/er/imself.
It's hard to say what a SVF ticker might look like. The funds, when they're working properly (which is at least almost always), maintain a stable $1.00 NAV, and yield more than the money market. The risk is expressed primarily in liquidity, in the sense that the sponsor has the right to limit sales over time. It also is possible for one's NAV to decrease. I'm not aware of any instance in which that's happened.
Maybe you could model one as if it were a CD, if you can work out the interest rate you want to use for your backtesting.
PJW
It's hard to say what a SVF ticker might look like. The funds, when they're working properly (which is at least almost always), maintain a stable $1.00 NAV, and yield more than the money market. The risk is expressed primarily in liquidity, in the sense that the sponsor has the right to limit sales over time. It also is possible for one's NAV to decrease. I'm not aware of any instance in which that's happened.
Maybe you could model one as if it were a CD, if you can work out the interest rate you want to use for your backtesting.
PJW
Re: Stable value funds with tickers?
Up until 2004 or 2005 there used to be some that were available in an IRA, but some regulatory interpretation caused them to become open ended short term bond mutual funds.
Paul
Paul
...and then Buffy staked Edward. The end.
Re: Stable value funds with tickers?
Before my wife's 401K stopped offering it (or Schwab discontinued it), the 401K offered a Schwab stable-value fund. I looked up the CUSIP, called Schwab (with whom I have an account) and tried to find out what it "was", so to speak. Four "let me connect you to"s later, I found a Schwab rep who e-mailed me a "snap-shot" of the SVF. Totally proprietary and totally confusing. Wife bought VBTLX.
Re: Stable value funds with tickers?
Stable values funds operate by a variety of different mechanisms, but one common mechanism is to buy longer term bonds and insure them against loss if sold. Note the "if sold" part. What makes the insurance reasonable is that stable value funds almost never sell their bonds; they hold them to maturity. In order for that to work, something has to prevent people from drawing substantial amounts of money on short notice; if they were able to do that, the insurance would be prohibitively expensive.
For this reason, stable value funds generally exist only inside tax deferred savings plans and the like. These have monthly deposits from employees and outflows are, typically, slow withdrawals over a retirement. Even in plans which let you switch among investments, most people don't do much switching and there are sometimes rules about doing the switching. For example, the Wisconsin 529 plan has a TIAA stable value fund but you're only allowed to move into or out of it once a year.
I wouldn't ever expect to see a ticker symbol for a stable value fund if, for no other reason, than they're stable value funds and the price doesn't vary so you don't need a symbol to look it up.
I agree with PJW; model it as a fairly long term CD with an early withdrawal penalty.
For this reason, stable value funds generally exist only inside tax deferred savings plans and the like. These have monthly deposits from employees and outflows are, typically, slow withdrawals over a retirement. Even in plans which let you switch among investments, most people don't do much switching and there are sometimes rules about doing the switching. For example, the Wisconsin 529 plan has a TIAA stable value fund but you're only allowed to move into or out of it once a year.
I wouldn't ever expect to see a ticker symbol for a stable value fund if, for no other reason, than they're stable value funds and the price doesn't vary so you don't need a symbol to look it up.
I agree with PJW; model it as a fairly long term CD with an early withdrawal penalty.
Re: Stable value funds with tickers?
OK, thanks for the inputs. Still, these (and many other retirement account investments) could use more transparency.
I'm having a hard time understanding how a fund that includes many different financial instruments, at least some of which are priced daily by the market, could result in a flat line return. Unless someone is pocketing any daily "cushion" above a flat line, with a promise to give back any shortfall below a flat line, and to do that they'd want a pretty big cushion, which would mean there's more to the operation of the fund than the expense ratio indicates. I'm not saying it's illegal or anything, I'm just saying it would be good to have better transparency on the excess beyond the "stable value." As far as I can tell there's no stated fixed return like you get with a CD, so I'm not so sure it's a flat line and it has to be tied to some interest rate fluctuation in some way, I'd think.
Anyways, I'll model it as a flat line. The next question is what do I use as the fixed value, and how long does it stay at that value until it jumps up or down to a new fixed value?
Also, just out of curiosity, are there specific regulations governing the operation of stable value funds, to where you can assume they are all interchangeable? I'm not asking for a regulation discussion, just whether these stable value funds are held to some standard that other funds are not.
I'm having a hard time understanding how a fund that includes many different financial instruments, at least some of which are priced daily by the market, could result in a flat line return. Unless someone is pocketing any daily "cushion" above a flat line, with a promise to give back any shortfall below a flat line, and to do that they'd want a pretty big cushion, which would mean there's more to the operation of the fund than the expense ratio indicates. I'm not saying it's illegal or anything, I'm just saying it would be good to have better transparency on the excess beyond the "stable value." As far as I can tell there's no stated fixed return like you get with a CD, so I'm not so sure it's a flat line and it has to be tied to some interest rate fluctuation in some way, I'd think.
Anyways, I'll model it as a flat line. The next question is what do I use as the fixed value, and how long does it stay at that value until it jumps up or down to a new fixed value?
Also, just out of curiosity, are there specific regulations governing the operation of stable value funds, to where you can assume they are all interchangeable? I'm not asking for a regulation discussion, just whether these stable value funds are held to some standard that other funds are not.
- Phineas J. Whoopee
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Re: Stable value funds with tickers?
Agreed.Tamales wrote:OK, thanks for the inputs. Still, these (and many other retirement account investments) could use more transparency.
Because, as previously pointed out, there's also insurance. Insurance companies, which are being paid for the service under terms they agree to, are guaranteeing the NAV, subject to their claims-paying abilities, and subject to the terms of the contracts, just as all insurance works.Tamales wrote:I'm having a hard time understanding how a fund that includes many different financial instruments, at least some of which are priced daily by the market, could result in a flat line return.
I'm pretty suspicious myself but I think that's an unwarranted level of paranoia.Tamales wrote:Unless someone is pocketing any daily "cushion" above a flat line, with a promise to give back any shortfall below a flat line, and to do that they'd want a pretty big cushion, which would mean there's more to the operation of the fund than the expense ratio indicates.
Again, agreed.Tamales wrote:I'm not saying it's illegal or anything, I'm just saying it would be good to have better transparency on the excess beyond the "stable value."
Correct. The return is whatever the underlying bonds pay, less any defaults, but with NAV insured, unless as specified by the insurance contracts it gets worse than X% down, less premia which may be structured in a number of different, untransparent ways.Tamales wrote:As far as I can tell there's no stated fixed return like you get with a CD,
You'd be right. There are risks, but those risks are unlikely to show up in the NAV, even though it's possible they will, and the interest rate is not guaranteed over the long term, even though most of the time it's likely to be higher than that available in the money market.Tamales wrote:so I'm not so sure it's a flat line and it has to be tied to some interest rate fluctuation in some way, I'd think.
It don't. The risk is not so much of fluctuating net asset value, as already expressed above, but of restrictions on redemptions, as already expressed above. It is possible for the NAV to go down, but it's much more likely for redemptions to take a year or more, gradually per month.Tamales wrote:Anyways, I'll model it as a flat line. The next question is what do I use as the fixed value, and how long does it stay at that value until it jumps up or down to a new fixed value?
Absolutely.Tamales wrote:Also, just out of curiosity, are there specific regulations governing the operation of stable value funds,
Absolutely not.Tamales wrote:to where you can assume they are all interchangeable?
You may wish to begin your investigations here.Tamales wrote:I'm not asking for a regulation discussion, just whether these stable value funds are held to some standard that other funds are not.
PJW
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Re: Stable value funds with tickers?
My company plan has an information sheet about the fund which gives a breakdown of the types of holdings and the pool of insurers with a yield that's set each quarter.