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April 06, 2012 at 09:28 AM
Just as the underlying investments in supposedly “safe” money markets are receiving increased scrutiny, so too are the underlying investments in stable value funds.
JPMorgan Chase & Co. is “shedding mortgage debt from a stable value fund, under pressure from insurers in a case raising questions about suitable investments for funds normally regarded as a super-safe haven for retirement savings,” Reuters reports
Stable value funds, as the news service notes, are used in 80% of 401(k) self-directed retirement plans and are meant to be the most conservative choice for employees—liquid, plain vanilla and backed by insurance.
But the $1.7 billion JPMorgan Stable Asset Income Fund has invested as much as 13% in private mortgage debt underwritten and rated by the bank itself, according to documents reviewed by Reuters, leading to a potentially troubling conflict of interest. The portfolio is available through a collective trust, which pools assets among various 401(k) plans, as well as through separately managed accounts whose allocations closely mimic the portfolio.
