Advantages of our approach
Putnam's Steven Horner, CFA, discusses differences between stable value and money market funds, including the ability to pursue smoother performance with a range of investments in bonds and guaranteed investment contracts.
Stable Value has consistently outperformed cash markets over the past 30+ years
Stable value funds offer attractive capital preservation options in many plans because they seek stable performance, like a money market fund, while also investing in the higher return potential of intermediate-term bonds. As a result, the stable value category has an average annual return premium above T-bills of 175 basis points over the past 30+ years. See the chart below. In the chart, U.S. 3-month T-Bill Index returns are used to represent approximate government money market returns. Note, SEC reforms since 2010 have required money market funds to reduce portfolio-weighted average maturity from 90 days to 60 days and maintain both daily and weekly liquid asset requirements.
Sources: Federal Funds Effective Rate as retrieved from FRED, Federal Reserve Bank of St. Louis; T-bill returns as represented by the ICE BofA (Intercontinental Exchange Bank of America) U.S. 3-Month Treasury Bill Index, an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace; and Stable Value returns as represented by the Morningstar US CIT Stable Value Index, which measures the performance of approximately 75% of the U.S. collective investment trust stable-value fund pooled universe.
ICE Data Indices, LLC (ICE BofA), used with permission. ICE BofA permits use of the ICE BofA indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofA indices or any data included in, related to, or derived therefrom; assumes no liability in connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.
Putnam Stable Value Fund (“the Fund”) is 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 Fund or any member of the public regarding the advisability of investing in stable value products generally or in the Fund in particular, or the ability of the Index to track general stable value products’ market performance.
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