DALLAS (BP)–The Annuity Board of the Southern Baptist Convention is expanding its investment choices for most retirement plan participants with the launch of the Capital Preservation Fund on April 1.
Currently, AB Funds Trust serves as the investment vehicle for the Annuity Board’s retirement plans offering 13 registered mutual funds. The Capital Preservation Fund will be offered by the Annuity Board as a 14th fund with characteristics similar to several stable value-type investment funds in the marketplace. The Capital Preservation Fund is not a registered fund and does not replace any of the existing mutual funds.
The fund will have a quarterly crediting rate applied to all contributions received. For the second quarter of 2003, the annualized rate will be 2.54 percent and the board will announce the crediting rate for the third quarter on its website, www.absbc.org, by June 16.
“We have received many requests from our participants wanting an investment choice that stresses preservation of principal and generally offers a more attractive return than a money market fund,” said John R. Jones, Annuity Board chief operating officer.
“We believe the Capital Preservation Fund will meet these criteria and offer our participants safety and stability in the current environment,” Jones added.
Commenting on the current conditions for launching the Capital Preservation Fund, Roddy Cummins, Annuity Board chief investment officer, noted, “We are in the lowest interest rate environment in over 40 years. However, with the majority of money market funds yielding 1 percent or less, the initial crediting rate of 2.54 percent provides the opportunity to offer potentially higher returns to our retirement plan participants whose investment objectives include low-risk investment options.”
In addition, Cummins indicated that the Federal Reserve had cut short-term interest rates 12 times in the past three years, taking short-term rates from 6.50 percent to 1.25 percent and as of March 17 average one- and three-year CD rates were at 1.79 percent and 2.59 percent respectively.
The Capital Preservation Fund will seek to maximize participants’ current income while seeking to maintain, but not guaranteeing, a stable price per share of $10. The fund will post monthly dividends based on the quarterly announced crediting rate.
Under normal circumstances, the fund will invest mainly in the investment grade fixed-income securities of short- to intermediate-term maturities. The fund’s crediting rate will change quarterly in response to changes in the market or interest rates which impact the value of the underlying assets of the fund.
“With the addition of the Annuity Board’s Capital Preservation Fund, we are now offering a more complete spectrum of investment options to our retirement plan participants who are seeking conservative investment objectives in this market,” Cummins added.
The fund is available to 403(b) and other employer-sponsored retirement plan participants, including those in the deferred compensation plans. It is not available to participants in IRAs, Personal Investment Accounts and most 401(k) plans.
Contributions and earnings to the Capital Preservation Fund will be subject to a 2 percent redemption fee in certain market environments. The fee is paid to the fund and is intended to compensate the fund for the impact of redemptions on the fund. The redemption fee will not apply if the redemption is due to a loan or a request for benefits for retirement, death, disability, termination of service or hardship.
More details about the fund and the redemption fee are available on the Annuity Board’s website, www.absbc.org or by calling 1-800-262-0511 and speaking with a customer relations specialist.