An AEGON news release said that the new product guarantees principal and pays a monthly return composed of a floating rate indexed to the Consumer Price Index (CPI) plus a monthly fixed rate above the index that is guaranteed for the life of the contract.
The issuing company closed its first Inflation GIC transaction in January and paid the contract’s first monthly coupon in February at 4.53%. Since then, several more have funded in both 401(k) and 457 plans, according to the announcement.
“No one really knows where interest rates or inflation will go,” said Chris Tobe, director of stable value for AEGON Institutional, in the announcement. “But it makes sense to hedge a risk before it becomes a problem. Put it this way: if inflation really heats up, the funds with an inflation protection allocation will probably be better off than funds without it.”
More information about the Louisville, Kentucky-based AEGON Institutional Markets is at http://www.aegoninstitutional.com/index.shtml .