Even Stable-Value Funds Carry Risk, Watson Wyatt Warns

In today’s unpredictable market, even the “safest” investments such as stable-value funds carry considerable risks that plan sponsors and participants might not be aware of, cautions Watson Wyatt. Thus, the consultant urges plan sponsors and investors to review their holdings.

Underlying investments and the insurance wrapper guarantees could be affected by the market, Watson Wyatt says.

“It’s hard to have the ‘stability’ in stable-value funds without a financially sound wrap contract structure,” said Sue Walton, senior investment consultant at Watson Wyatt. “Without a change in the current market, the trend toward higher fees and fewer providers is likely to continue. Neither of these shifts is beneficial for sponsors and participants.”