The fund will feature a so-called 24-month put option, requiring participating DC plans wishing to exit the fund to give 24 months’ notice in order to receive the book value of their investments. Like most other stable value funds, the Invesco fund has been operating with a 12-month put option.
The new strategy was done to encourage wrap providers to provide more of the insurance that guarantees to stable value participants the book value of the underlying stable value bond products, Stephen F. LeLaurin, a managing director and senior client portfolio manager, said in an interview.
“We have adequate wrap capacity, but this will give us more wrap capacity,” Mr. LeLaurin said. “Also, this will position our fund for growth.”
When Invesco initiated a “soft close” of its Stable Value Trust Fund in April 2011, the company cited “industrywide constraints” on wrap capacity as the reason for its action.
Mr. LeLaurin said his discussions with wrap providers indicate they like the 24-month period because “they have more time to manage the payments (to exiting DC plans) and more time to protect the plan and participants that stay in the fund.”
In a letter being sent to clients April 1, Invesco said the economic crisis of 2008 caused some wrap providers to drop out of the market and others to limit the amount of wrap insurance they would provide. In succeeding years, wrap providers have insisted on stricter contracts.
Invesco is the second pooled stable value fund to offer a 24-month put option. The first was Pacific Investment Management Co., which launched its PIMCO Stable Income Fund in March 2012.