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Comparing Manager Pooled Stable Value & Insurance Separate Account Stable Value Products

When determining the optimal stable value product for their plans, plan sponsors and their advisors often compare insurance company products, such as Insurance Separate Account Stable Value Products, which are also called Separate Account Guaranteed Investment Contracts (SAGIC), to Managed Pooled Stable Value Funds (Pooled Funds). On the surface, SAGICs appear to offer an attractive alternative to Pooled Funds but a closer look is warranted.

Determining the Best Fit for Your Plan

In our previous article we suggested paying close attention to three attributes when evaluating Pooled Funds and Insurance General Accounts (GIC): Transparency, Credit Exposure and Exit Provisions. While SAGICs have improved on the GIC structure product in two of these three attributes, they don’t always provide the same level of Transparency and Exit Provisions as Pooled Funds. SAGICs are typically structured as a group annuity contract issued by the insurance provider much like GICs. As such, plans do not have an ownership interest in the underlying assets and have direct credit exposure to the insurance company provider.

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Disclosures

The information contained herein may not be an exhaustive overview of the varying structures differences. A plan should fully evaluate each structure type and make their own determination as to the appropriate structure for their plan.

All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Outlook and strategies are subject to change without notice.

The credit quality of a particular security or group of securities does not ensure the stability or safety of an overall portfolio. The quality ratings of individual issues/issuers are provided to indicate the credit-worthiness of such issues/issuer and generally range from AAA, Aaa, or AAA (highest) to D, C, or D (lowest) for S&P, Moody’s, and Fitch respectively.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2022, PIMCO.

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