Changing regulatory environment for money market funds may boost demand for stable value funds
"The changing regulatory environment for money market funds and continued market volatility may boost demand for stable value funds," says Gary Ward, head of Stable Value for Prudential. Beginning in October 2016, the U.S. Securities and Exchange Commission will implement new changes, which will allow money market funds to impose redemption fees or temporarily halt redemptions when the funds fall below certain liquidity thresholds.
New research from Prudential shows that the more than $770 billion stable value market is well positioned for continued growth. The research found that 39 percent of plan sponsors who moved money out of a money market fund in the past year, or plan to do so in the next three years, switched some of it to stable value funds or plan to do so. Among intermediaries, 52 percent of them moved proceeds from money market funds to stable value funds as a result of the proposed rule change. The research notes that money market funds are somewhat similar to stable value funds in their ability to offer protection of principal, which could lead to market share gains by stable value.
"The coming regulatory changes to money market funds coupled with increased interest in stable value funds from plan sponsors and intermediaries are telltale signs that the market will continue to thrive," Ward explains. "The industry has a great opportunity to meet the demand of stable value funds by communicating its well-known positive attributes, like capital preservation and guaranteed returns, and championing its lesser-known attributes, like its role as a diversification tool for investors of any age."
Want more information? Read the research, "Expanding the Case for Stable Value" or the news release. Want to speak with Gary? Contact Josh Stoffregen.