Have stable value funds been affected by credit downgrades?
Stable value funds may be affected by credit downgrades of contract issuers and/or the underlying securities in a stable value portfolio of assets. That is why most stable value funds have strict investment guidelines that set overall standards for all securities held by a stable value fund. Investment guidelines require stable value portfolios to maintain a specific, overall, high credit quality standard and to be highly diversified. Further, assets that are downgraded below the minimum credit quality guideline are generally limited to a specific percentage, usually no more than five percent of the portfolio. Such assets that exceed the specified threshold must be rehabilitated -either sold and replaced with high credit quality securities or enhanced to restore credit quality-within a set period of time.
