Strategy Spotlight

Why Stable Value is the Preferred Capital Preservation Option

Stable value continues to be the preferred capital preservation option among both small and large plan investment consultants. According to PIMCO’s 14th annual 2020 DC Consulting Study, 96% of the survey’s participating consultants recommended stable value over money market funds.

These results recognize that stable value has been a fixture of defined contribution (“DC”) plans since their debut in the early 1980s principally because it has provided higher income than money market funds in most economic environments.

Stable value has provided higher income historically

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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.

You could lose money by investing in a Money Market Fund. Because the share price of the Fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

PIMCO does not offer insurance guaranteed products or products that offer investments containing both securities and insurance features.

Stable value investment contracts (wrap) are over the counter agreements issued by insurance companies, banks, and other financial institutions, are intended to help reduce principal volatility of, while providing steady income from, any associated Fund fixed income investments, and are intended to be valued at contract value (typically, deposited principal plus accrued interest less redemptions). Investment contracts vary and may include insurance company separate account contracts, synthetic contracts (also known as wrap contracts), or insurance company general account contracts. Insurance company separate account contracts and synthetic contracts are a combination of fixed income investments (associated assets) and an agreement by a contract provider to allow qualified participant transfers and withdrawals from a fund at contract value. Generally, there is no immediate recognition of investment gains and losses on associated assets; instead, investment gains and losses are amortized over time into the investment contract’s performance by adjusting the contract’s credited rate of interest. A general account contract is a deposit into an insurance company’s general investment account. Stable value wrap contracts are subject to credit and management risk. Although stable value investments seek to reduce the risk of principal loss, you could lose money by investing in a Stable Value strategy.

Management risk is the risk that the investment techniques and risk analyses applied by an investment manager will not produce the desired results, and that certain policies or developments may affect the investment techniques available to the investment manager in connection with managing the strategy.

The PIMCO Stable Value products are not sponsored, endorsed, sold or promoted by Morningstar, Inc. or any of its affiliates (all such entities, collectively, “Morningstar Entities”). The Morningstar Entities make no representation or warranty, express or implied, to the owners of the PIMCO Stable Value products or any member of the public regarding the advisability of investing in stable value products in particular or the ability of PIMCO to track general stable value market performance.


The correlation of various indexes or securities against one another or against inflation is based upon data over a certain time period. These correlations may vary substantially in the future or over different time periods that can result in greater volatility. The continued long term impact of COVID-19 on credit markets and global economic activity remains uncertain as events such as development of treatments, government actions, and other economic factors evolve. The views expressed are as of the date recorded, and may not reflect recent market developments. There can be no guarantee that the trends cited above will continue.

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 long-term, especially during periods of downturn in the market. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those shown.

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 [Select one: manager – or – author but not necessarily those of PIMCO] 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.