Stable value funds are ideal investments for millennial investors, according to Gina Mitchell, president of the Stable Value Investment Association.
Really, they’re good for any risk-averse investor, she said in an interview with ThinkAdvisor on Wednesday. For “anyone who’s concerned about risk, stable value can play a role.”
Mitchell’s organization, the Stable Value Investment Association, represents public and private defined contribution plan sponsors as well as investment managers and insurance companies that provide the investment contracts in stable value funds.
Stable value has been offered in 401(k) plans since their inception, Mitchell said. “It’s always been one of the foundations in defined contribution plans,” she said.
Stable value makes up about 12% of DC assets, Mitchell said, and SVIA members manage $721 billion in stable value, “about 70% to 80% of the stable value universe.”
Millennials fit squarely into that “concerned about risk” category.
“As you know, millennials are incredibly risk averse,” Mitchell said. “They’ve got about a third of their money in cash or money market funds in their 401(k).”
Millennials’ cash holdings vary depending on the report, but most agree younger investors are highly conservative. According to the first-quarter 2014 UBS Investor Watch, millennials have 52% of their assets in cash. A January report by Market Strategies International put their cash allocation much lower at 25%, “about the same risk profile as a 50-year-old.”
The 2014 Investment Company Institute Fact Book draws a different picture of millennials. The report, which is based on 2012 data, found investors in their 20s have 11% of their assets in safe investments, including guaranteed investment contracts, stable value funds, money market funds and bonds.