"During a booming market, stable value funds hold little appeal for investors accustomed to reaping sky-high returns from stocks and mutual funds," said Aruna Hobbs, director of business development and head of the stable value unit for AEGON Institutional Markets in Louisville.

"But as a diversified core holding, stable value can help reduce the sting in a market downturn. Smart investors use stable value funds to ride out the bad times," Hobbs said.

The nation's leading provider of stable value products, AEGON reports that sales have more than doubled during the first six months of the year over the same period in 2000. In total, AEGON handled $5.5 billion in new stable value deposits from January through June, up from $2.6 billion the first six months of 2000.

Stable value investments are fixed income vehicles that are offered by about two-thirds of all 401(k) plans and hold about 25% of all retirement plan assets. The funds protect the value of the principal plus all accumulated interest and consistently outperform money market funds while offering a lower risk factor.

"We think investors have begun to realize that they must make more realistic choices, especially when it comes to long-term retirement savings," Hobbs says. "The volatile stock market over the last year has emphasized the importance of having a diversified portfolio that includes a safety zone such as a stable value fund."

--Craig Gunsauley, Employee Benefit News

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.