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Top-Performing Stable Value Strategy Incorporated into Vantagepoint Target-Date Funds

October 25, 2018

Vantagepoint Milestone Funds add Vantagepoint PLUS Fund to investment mix

The fixed income allocation of the Vantagepoint Milestone Funds (Milestone Funds) was recently expanded to include investment in the stable value Vantagepoint PLUS Fund (PLUS Fund).

The Milestone Funds, a family of diversified target-date funds, are designed to meet investors' needs through retirement. The funds gradually shift to a more conservative asset allocation as the designated retirement date approaches. This is intended to reduce investment risk as the investor's time horizon shifts.

As the Milestone Funds shift over time, capital preservation and the consistent return of the fixed income portion of the allocation are of critical importance, especially as investors approach retirement. By adding the PLUS Fund to this investment mix, ICMA-RC seeks to enhance performance in the funds, particularly as interest rates continue to rise, while minimizing risk.

The PLUS Fund is a stable value fund. It invests primarily in traditional guaranteed investment contracts (GICs), separate account GICs, and synthetic GICs with an objective to offer a competitive level of income consistent with providing capital preservation and meeting liquidity needs. The yield from a stable value fund, or crediting rate, fluctuates with changes in interest rates. The PLUS Fund will generally follow interest rate trends, but on a lagged basis.

Incorporating the PLUS Fund offers two benefits to investors in the Milestone Funds: a track record of above-average stable value fund performance and the historic ability to generally outperform bonds when interest rates rise. The PLUS Fund is one of the industry's top-performing stable value funds,* outperforming its benchmark over all periods, as shown in the chart below.

Performance for the Period Ended September 30, 2018
Fund/Benchmark NameQtr (Annualized)YTD1-Yr3-Yr5-Yr10-Yr
Vantagepoint PLUS Fund1 2.43% 2.40% 2.38% 2.25% 2.25% 2.83%
ICE BofAML US 3-Mo. TBill Index2 (Annualized) 1.98% 1.74% 1.59% 0.84% 0.52% 0.34%

1Performance shown is for the VT III Vantagepoint PLUS Fund in which the Milestone Funds invest. The VT III Vantagepoint PLUS Fund is a master fund that is not available for direct investment. Eligible investors can purchase the Vantagepoint PLUS Fund R Class or S Class, which are feeder funds to the VT III Vantagepoint PLUS Fund and include additional fees which will result in lower performance for direct investors.

2The Intercontinental Exchange Bank of America Merrill Lynch (ICE BofAML) U.S. 3-Month Treasury Bill Index is comprised of a single U.S. Treasury Bill issue purchased at the beginning of each month and held for a full month, at which time that issue is sold and rolled into a newly selected issue. The issue selected each month is that having a maturity date closest to, but not beyond, 90 days from the rebalance date.

In addition, as a stable value fund, the PLUS Fund seeks to provide investors with some protection in a rising-rate market. "Although the bonds that underlie these investments may fluctuate in value, investors are insulated from the immediate potential for capital losses due to rising rates," explains PLUS Fund Portfolio Manager Karen Chong-Wulff. "And, as rates rise gradually, the income that stable value funds generate are also expected to increase. These funds offer capital preservation in rising-rate markets, along with income, contrary to most bond fund values as bond prices go down with higher interest rates."

Adding the PLUS Fund to the Milestone Funds' asset mix will provide retirement investors in the funds with additional stability and return potential, enhancing their ability to reach their long-term goals. "We believe adding the PLUS Fund as an underlying fund to the Milestone Funds will benefit participants by increasing asset diversification and reducing volatility in times of rising interest rates," says ICMA-RC Senior Vice President and Chief Investment Officer Wayne Wicker.

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*The VT III Vantagepoint PLUS Fund is a top-performing fund when compared against other stable value funds included in the Hueler Analytics Stable Value Pooled Fund Comparative Universe (Hueler Universe). The Hueler Universe represents the performance returns of actual stable value pooled funds, and its Index is the stable value industry benchmark used by many institutional investors, consultants, advisors, and plan sponsors for monitoring stable value pooled funds. ICMA-RC does not independently verify Hueler Universe data. Gross returns used in the Hueler Universe do not include plan administration fees, adviser expenses, or other stable value fund costs - actual performance would be commensurately lower.

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