Fixed income and bonds, which fall into the general category of capital preservation and can also include stable value and GICs, are a hot topic in DC plans — even as their yields are anything but hot. With money market funds yielding close to zero, advisors need to find investment options for participants who are close to retirement or are unwilling to take any risk. These may include first-generation Americans, who are savers, not investors.
As a result, there’s more discussion about alternatives like high yield and international bonds to generate greater returns and protect investors against low interest rates and inflation.
Yet most advisors don’t understand capital preservation funds, especially stable value and GICs — which makes the market that much more interesting. One big index fund provider just announced (free registration required) that it plans to introduce a low-cost, stand-alone international bond index fund and ETF.
