A white paper by PIMCO’s stable value portfolio management team and the head of their DC practice describes in detail some of the steps that advisors should go through when making decisions about which fund(s) they should select for the capital preservation space in a DC menu.
The main issue to understand is the quality of the underlying fixed income manager, which is the case whether you are looking at a guaranteed product or a non-guaranteed option. Many advisors focus solely on the crediting rate or yield of these investments. While this is important, it is certainly not the only issue to consider when analyzing the space. You need to look at the sustainability of these yields and what the underlying wrap contracts look like on the guaranteed side.
Advisors will serve themselves well if they take the time to be an expert on all things related to capital preservation. This continues to be a very hot topic among plan sponsors and, since it is the largest asset class in DC, many are looking for experts to help them better understand the space.
