We thought the chart below may be of interest. We compared performance results of Stanford’s investors taken from the SEC complaint cited in our previous blog post with one of the largest stable value funds (name withheld). Stanford results in the complaint go only through 2006 and that’s why the line stops there while the stable value fund continues its upward trend through 2008.
This neither legitimizes SIB nor makes the stable value fund an immediate suspect. It is just another confirmation that investors need more disclosure on investment vehicles priced at book value. Having credit and interest rate exposure information is important. Having monthly market values would be extremely helpful. Not only it allows one to monitor the the MV/BV ratio, but more importantly, helps to uncover hidden risks using returns-based tools.
There is growing public awareness of potential risks associated with book value accounting in stable value funds. A couple of weeks ago I mentioned our blog to Eleanor Laise with The Wall Street Journal and she wrote an article on stable value funds in the March 26 issue of WSJ.