5 Best Stable Value Funds for Security Now | Investing

For investors in or approaching retirement, preserving capital becomes at least as important as growth. Putting money into low-risk vehicles is a way of protecting your future purchasing power.

Stable value funds fit the bill. According to the Stable Value Investment Association, or SVIA, a nonprofit organization that educates plan sponsors and investors about retirement saving, stable value funds had $841 billion in assets at the end of 2024.

The group notes that in addition to principal preservation, stable value provides consistent, positive returns and liquidity.

Stable value funds are only available in tax-qualified plans, such as employer-sponsored 401(k)s. About three-quarters of such plans now offer this option.

According to a SVIA report from December 2024, there are four types of stable value funds: individually managed accounts, pooled funds, insurance company general accounts and insurance company separate accounts.

Despite these having different characteristics, “All have a contractual element that protects against interest rate volatility in order to provide plan participants with safety, liquidity and attractive returns,” the report states.

These funds invest in high-quality, short- to intermediate-term fixed-income securities and are combined with insurance contracts, or wraps. This serves to protect against interest rate fluctuations and losses, says Jon Wolfenbarger, founder and CEO of New York-based BullAndBearProfits.com.

“Stable value funds are more appropriate for conservative investors and/or those investors about to enter retirement than are equity and bond funds,” Wolfenbarger says, adding that these vehicles typically offer higher returns than money market funds.

As with any investment, investors should understand what they own. “Stable value funds do an excellent job of capital preservation within a retirement plan, but trade-offs, (such as) rate lag, withdrawal gates, insurer credit exposure and hidden costs, require vigilant monitoring by both plan fiduciaries and participants,” says Joshua Mangoubi, founder of Considerate Capital Wealth Management in Chicago.

Here’s a look at five of the largest stable value funds that investors may find in their qualified plans. Stable value funds are not publicly traded and are not mutual funds, so they do not have a ticker. They may use a CUSIP, which is a unique identifier to distinguish them from other funds within a plan:

According to fund manager Invesco, this product’s objective is preservation of principal, along with generating a reasonable interest income under prevailing market conditions.

Its asset allocation consists of short-term investments such as cash and cash equivalents; core investments, which include high-quality, fixed-income securities and contracts; intermediate-term investments; and short-duration fixed-income investments.

A unique characteristic, Wolfenbarger says, is that Invesco uses multiple managers, including Dodge & Cox, Jennison and Loomis Sayles. “Diversification across wraps reduces risk, and Invesco excels at this,” he adds.

According to issuer MetLife, this fund aims “to provide safety of principal, adequate liquidity and a competitive yield with low return volatility.”

The fund’s average bond duration is 3.51 years; that type of short-term fixed-income investment reduces volatility. It tilts toward investment-grade bonds, with the average credit quality being AA.

The fund offers a separate account option, meaning that assets are held in a dedicated account rather than being pooled with other investors’ money. This provides greater transparency and control over how the funds are managed.

MetLife also offers general account versions. “These may offer higher yields, but with less transparency,” Wolfenbarger says.

This is a popular fund, but it’s seen some management changes in recent years.

In 2022, Empower acquired Prudential Financial’s full-service retirement business, which included Prudential’s stable value and separate account investment products.

“It’s the market’s largest pool after the Prudential acquisition, but sponsors should review contracts carefully because some terms changed in the transition,” Mangoubi says.

As with other fund managers, Prudential/Empower offers stable value products in various forms, including general accounts, separate accounts and guaranteed investment contracts. These funds are offered in various plan types, including 401(k), 403(b), 457, 529 college savings plans and health savings accounts, or HSAs.

This manager has offered stable value funds for more than four decades and has over $35 billion of stable value assets under management.

It offers multiple fund structures. For example, Guaranteed Interest Accounts offer principal protection and semiannual crediting rate resets. Collective Investment Trusts provide a cost-efficient choice for institutional plans.

A positive is that these products are backed by a mutual insurer with AAA/A++ ratings, which can offer investors confidence in fund stability.

However, Mangoubi says, New York Life’s “ultra-conservative portfolio can lag peers when short-term rates jump quickly.”

This insurer offers stable value funds for various plan sizes.

“It is small-plan friendly, with no minimums and daily liquidity, yet its single-insurer structure and higher expense spread limit diversification and net yield,” Mangoubi says.

Wolfenbarger points out that the company uses both wraps and insurance-based structures. These two types of stable value protection mechanisms each offer a different way of protecting principal and generating stable income.

“The fund family is a smaller player, but it’s part of Manulife Financial, a large Canadian insurer,” Wolfenbarger says. “It may offer more flexibility or personalized service for smaller retirement plans.”

However, he notes that this fund family’s more modest scale could limit access to the best wrap pricing.