The plain-vanilla insurance com- pany guaranteed investment contract has long been the ugly stepsister of fixed-income investments.
The GIC fund is a popular low-risk investment alternative in most 401(k) plans -- despite sophisticated investment strategists' attempts to nudge participants into the equity market. They claim GICs don't pay enough over the long term to provide sufficient retirement income.
That may be true, but GICs don't appear all that stodgy when compared with their high-profile brethren -- bonds.
According to Ned Schmidt, president of Schmidt Management Co., a Deland, Fla. insurance and stable value market research firm, GICs have outperformed 30-year Treasury Bonds since 1993 on a constant maturity basis by a healthy margin.
There is even talk of defined benefit plans using GICs as a bond replacement.
For all those 401(k) plans which dumped GIC funds in favor of bond funds in recent years, Mr. Schmidt says: "Sending your bond manager to a state program for job retraining is appropriate."