Chrysler Stable Value Fund Posts Loss

April 3, 2009 ( - A retirement fund for Chrysler LLC employees that was designed not to lose money has been depleted at 89 cents on the dollar, Reuters reports.

Losses for the Chrysler Stable Value Fund B, which was in the Chrysler Salaried Employees’ Income Deferral Plan, resulted from market volatility and a large number of withdrawals in January, Chrysler spokesman David Elshoff told Reuters. “While it is unfortunate that the Stable Value Fund B did not pay out at 100% of its book value, participants had been cautioned that they could assume financial risk in unsecured plans, including the Stable Value Fund B,” he said, according to the news report.

Elshoff added that the supplemental savings plan and the Stable Value Fund B are not related to Chrysler’s 401(k) savings plans or the 401(k) Stable Value Fund investment option.

Individuals have invested about $520 billion in stable value funds through roughly 138,000 defined contribution plans, including 401(k), 403(b) and 457 plans, according to the Stable Value Investment Association, the news report said. The funds typically invest in high-quality bonds and buy contracts, known as wraps, from banks and insurance companies to guarantee principal and interest and provide positive returns. They are seen as being as safe as cash, and millions of investors can use them as a substitute for traditional money market funds.

However, last year, several money market funds “broke the buck” – fell below $1.00 net asset value (see ICI Answers Questions on Money Market Funds ) – prompting the U.S. Treasury to open a guarantee program for money market funds (see Treasury Opens Guarantee Program for Money Funds ).