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Author: WADERPRO Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: WHAT IS SAFE NOW? Date: 9/17/2008 8:47 PM
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I moved to a stable value fund recently, thinking this was the safe haven. Now I'm seeing that this fund has contracts with AIG, JP Morgan, B of A, and others. How STABLE is this?
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Author: PKnudsen Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63875 of 76237
Subject: Re: WHAT IS SAFE NOW? Date: 9/18/2008 7:25 PM
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I moved to a stable value fund recently, thinking this was the safe haven.

Interesting. I had not heard of these before. According to SmartMoney these averaged 5.6% over the past 12 months. Not too exciting but pretty good compared to most investments lately!

Now I'm seeing that this fund has contracts with AIG, JP Morgan, B of A, and others. How STABLE is this?

What's the name of the fund? "Contracts" could be anything, perhaps research or brokerage. Does your source say?

Then there's this: (from SmartMoney)

Now the majority of stable-value assets are invested in "synthetic GICs," also known as "wrapped bonds". These are high-quality, short- to intermediate-term bonds that are bound by insurance "wrappers." The way it works is if a stable-value portfolio falls below the rate of return set by the wrapper, the insurer pays the difference, keeping the fund stable. On the other hand, if the portfolio gains beyond the wrapper's set return, the fund pays the insurer the difference. Wrapped bonds currently comprise about 60% of the assets of the average stable-value fund.

Bottom Line: I'd say your fund is probably pretty safe unless it has a big dependency on AIG. And even then, AIG is too big to fail, so it'll be bailed out.

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