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Products February 22, 2012
J.P. Morgan Enhances Stable Asset Income Fund
J.P.
Morgan Asset Management enhanced its pooled Stable Asset Income Fund
(SAIF).
Reported by Tara Cantore
The enhancement will ensure the fund remains open and available to new investors.
According to J.P. Morgan Asset Management, traditionally, most pooled stable value funds (which are made of up assets from many 401(k) plans including SAIF, have allowed plan sponsors to terminate their participation in the fund at book value within 12 months of giving notice (known as a “12-month put option”). The risks associated with this put option have constrained wrap capacity. As a result, these products are at risk of becoming scarce, which could potentially limit plan sponsor and participant investment choices.
To ease this problem, J.P. Morgan Asset Management eliminated the put option from SAIF. This change has no impact on individual participant-elected transactions. This enhancement ensures that SAIF remains a viable and available investment option for defined contribution plans.
“The stable value pooled fund marketplace is feeling certain unique pressures from wrap providers because of the book value put option,” said Portfolio Manager Peter Chappelear, managing director and head of J.P. Morgan Asset Management’s stable value business. “We evaluated various remedies to the problem, and determined that eliminating the put option was the only solution that provided complete relief while benefiting long-term investors.”
With this enhancement, investors in SAIF will be able to remain fully invested even with growth in the size of the Fund and sponsors will not be subject to a potential delay when exiting the Fund. Also, retirement plan advisers will benefit from increased product availability made possible by the enhancement.
“Stable value funds play an important role as a fundamental building block in defined contribution plans,” said Michael Falcon, head of retirement for J.P. Morgan Asset Management. “It’s important that these products are able to perform as they were designed to, with uninterrupted access for participants who rely upon them. Our enhancement enables that.”