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Synthetic GIC what is it ?
Old 12-17-2018, 03:31 PM   #1
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Synthetic GIC what is it ?

Small 401k from a long ago mega-corp job, has changed the stable value fund. Used to be invested in Guaranteed Investment Contracts spread among over a dozen insurance companies, and banks. , short term paper, etc.

The new fund prospectus says it is 4% cash and 96% " Synthetic GIC's" thru one foreign bank.

I have a rough idea of how " Synthetic CDO'S " work , so what the heck is a Synthetic GIC ?

For lack of a better term - Side bets among financial institutions ?
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Old 12-17-2018, 03:39 PM   #2
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A synthetic gic is a pile of very conservative bonds wrapped with a guarantee from a highly rated financial institution. Also called stable value wraps. I think these are generally less risky than actual gics, formerly the mainstay of the stable value world.
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Old 12-17-2018, 03:50 PM   #3
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The more complicated the offering, the more likely it was designed to make money for the seller, not the buyer. I would not even bother to try to understand it. I'd just stay away.
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Old 12-17-2018, 03:59 PM   #4
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If you like the stable value fund in your plan, I would not let the use of synthetic gics keep you from using it. They are less risky than traditional gics.
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Old 12-17-2018, 04:10 PM   #5
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What is the current rate? That would help me decide to invest or stay away. Our SVF slid all the way to 1.6% and lately rose a bit to 2%. There are better risk free options these days.
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Old 12-17-2018, 04:11 PM   #6
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Thanks Brewer,

Now I'm not concerned.

Anytime I see something I don't understand, alarm bells go off........
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