Three stable value fund managers have this year lifted “soft closes” that prevented investments from most or all new clients, moves seen illustrating the continued strengthening of the stable value market.
A primary source of an improved market — and a key reason for ending some soft closes — is the greater availability of wrap insurance, which guarantees to participants the book value of the underlying stable value investments. And as stable value wrap capacity has grown, so has the amount of stable value assets under management.
“The market has stabilized,” said Cynthia Mallett, vice president of industry strategies and public policy for MetLife Inc., New York, whose company provides a combined $48.6 billion in wrap insurance and stable value investments. “Wrap capacity has always been elastic. We're at a nice equilibrium now.”
David Ferry, senior director at Galliard Capital Management Inc., Minneapolis, agreed. “It's a better environment than it was three or four years ago,” said Mr. Ferry. Galliard has $78.8 billion in stable value assets under management.
Insufficient wrap capacity was identified by some managers as the main reason for imposing soft closes, and adequate capacity was cited as encouraging the reopening of funds.
In April, Bank of New York Mellon reopened its $1.05 billion stable value fund to all new investors due to improved wrap capacity, said spokesman Mike Dunn. The fund initiated a soft close in January 2012. The fund, managed by the company's San Francisco-based Standish Mellon Asset Management, was reopened to new investors in segments, based on how much they were investing.