Analyzing John Hancock Stable Value Fund Collective Investment Trust Financial Statements: Data-Driven Insights for Investors
Reading the John Hancock Stable Value Fund Collective Investment Trust financial statements reveals a conservative fixed-income vehicle designed to preserve capital while delivering returns above money market rates. This fund, available through employer-sponsored retirement plans, held approximately $30 billion in assets as of its most recent reporting period, making it one of the largest stable value options in the U.S. defined contribution market. The financial statements show a portfolio built on investment-grade bonds wrapped in insurance contracts that smooth returns and protect principal, a combination that appeals to risk-averse retirement savers but demands careful scrutiny from value-oriented investors.
Key Takeaways
- The John Hancock Stable Value Fund CIT has delivered crediting rates between 2.5% and 4.5% over recent years, depending on interest rate environment
- Financial statements show over 95% of holdings carry investment-grade credit ratings (BBB or higher)
- The fund uses wrap contracts from insurers to stabilize book value, a feature not visible in traditional bond fund statements
- Expense ratios range from 0.25% to 0.65% depending on share class and plan size
- Unlike money market funds, stable value funds restrict participant-directed transfers to competing options
- Understanding these financial statements helps value investors decide how much of their retirement portfolio belongs in capital preservation
What Is a Collective Investment Trust?
A collective investment trust (CIT) is a pooled investment vehicle available exclusively to qualified retirement plans. Unlike mutual funds, CITs are not registered with the SEC. They are governed by the Office of the Comptroller of the Currency (OCC) or state banking regulators, depending on the trustee.
This distinction matters because CITs have lower regulatory overhead, which translates to lower expense ratios. A CIT version of a stable value fund often charges 0.10% to 0.25% less than an equivalent mutual fund, a meaningful difference over a 30-year career of retirement saving.
John Hancock's CIT structure means the financial statements follow trust accounting standards rather than mutual fund reporting rules. The statements include a statement of assets and liabilities, a statement of operations, and notes detailing the wrap contract provisions.
Breaking Down the Financial Statements
Statement of Assets and Liabilities
The balance sheet of the John Hancock Stable Value Fund CIT shows:
| Line Item | Approximate Value | Significance |
|---|---|---|
| Total Investments at Fair Value | $28.5B | Market value of underlying bonds |
| Wrap Contract Adjustment | +$1.2B | Difference between book value and market value |
| Total Net Assets at Contract Value | $29.7B | What participants see as their balance |
| Expense Accruals | $45M | Quarterly management and wrap fees |
| Net Investment Income | $1.1B | Annual income from bond coupons and wrap gains |
The wrap contract adjustment is the single most important line item. When interest rates rise, bond prices fall, and the fair value of the underlying portfolio drops below book value. The wrap contracts provided by insurance companies (MetLife, Prudential, Transamerica, and others) bridge this gap, ensuring participants can transact at book value rather than market value.
This mechanism is what makes stable value different from a bond fund. A typical intermediate bond fund like BND might decline 10% when rates rise 2%, but a stable value fund maintains its stated value.
Statement of Operations
The income statement reveals how the fund generates returns:
Investment income comes from bond coupon payments. With a portfolio weighted toward intermediate-term corporate and government bonds, the yield reflects prevailing market rates with a lag. As of the most recent statements, the gross yield on the underlying portfolio was approximately 4.8%.
Wrap contract fees reduce that yield. Insurance companies charge 0.15% to 0.30% annually to provide the book value guarantee. After wrap fees and management expenses, the net crediting rate passed to participants typically ranges from 3.0% to 4.2%.
Realized and unrealized gains/losses on the bond portfolio appear in the financial statements but do not directly impact participant returns. The wrap contracts absorb these fluctuations, smoothing returns over time.
Credit Quality Analysis
Value investors instinctively assess credit risk. The John Hancock Stable Value Fund CIT financial statements break down holdings by credit quality.
| Credit Rating | Allocation | Description |
|---|---|---|
| AAA | 25% | U.S. Treasuries and agency MBS |
| AA | 15% | High-quality corporate bonds |
| A | 30% | Investment-grade corporate bonds |
| BBB | 25% | Lower investment-grade |
| Below BBB | 3% | High-yield exposure |
| Cash/Equivalents | 2% | Liquidity buffer |
The 3% below-investment-grade allocation is notable. While small, it introduces credit risk that participants may not expect in a "stable value" vehicle. During credit stress events, defaults in this tranche could affect the fund's ability to maintain its crediting rate.
Compare this to the Piotroski F-Score framework, which assesses financial health at the individual company level. Just as a Piotroski score of 8 signals strong fundamentals for a stock, a portfolio with 95%+ investment-grade bonds signals strong credit fundamentals for a fixed-income fund.
Duration and Interest Rate Sensitivity
The financial statements disclose the portfolio's effective duration, typically between 2.5 and 3.5 years for John Hancock's stable value CIT.
Duration measures how sensitive the bond portfolio is to interest rate changes. A duration of 3.0 means that if interest rates rise by 1%, the market value of the underlying bonds falls approximately 3%.
For stable value investors, duration matters because it affects the wrap contract economics:
- Short duration (under 2 years): Lower yield, smaller book-to-market gaps, cheaper wrap contracts
- Medium duration (2.5-3.5 years): Balanced yield and risk, standard for most stable value funds
- Long duration (over 4 years): Higher yield, larger potential book-to-market gaps, more expensive wrap contracts
John Hancock manages duration within a tight band. The financial statements show quarterly duration adjustments as the manager adds or trims longer-dated bonds in response to interest rate movements and participant cash flow patterns.
Fee Structure Revealed in the Statements
The financial statements disclose all fees charged to the fund:
Trustee/management fee: 0.15% to 0.35%, depending on plan size. Larger plans negotiate lower rates.
Wrap contract fees: 0.15% to 0.30% paid to insurance companies for the book value guarantee.
Operating expenses: 0.05% to 0.10% for custody, accounting, and audit services.
Total expense ratio: 0.35% to 0.65% all-in.
A plan with $500 million in stable value assets might pay 0.35% total, while a $10 million plan might pay 0.60%. The financial statements aggregate these fees, but plan sponsors receive participant-level expense disclosures.
For context, a comparable Vanguard bond index fund charges 0.04% to 0.10%. The premium for stable value reflects the wrap contract cost and active management of the underlying bond portfolio.
How Stable Value Fits a Value Investor's Retirement Portfolio
Stable value serves a specific purpose: capital preservation for money you will need within 5 to 10 years.
A 55-year-old value investor planning to retire at 65 might allocate:
- 50% to value equities (screened using Piotroski F-Score, P/E below market, high ROIC)
- 20% to stable value (capital preservation for near-term retirement income)
- 15% to international value equities
- 10% to intermediate bonds
- 5% to cash
For a 30-year-old with a 35-year time horizon, stable value allocation should be minimal, perhaps 5% or less. The opportunity cost of earning 3.5% in stable value versus 10%+ in a diversified value equity portfolio is enormous over three decades.
Using the ValueMarkers screener, you can identify which value stocks belong in the equity portion of your retirement portfolio, filtering by P/E ratio, P/B ratio, Piotroski F-Score, and Altman Z-Score across 73 global exchanges. The VMCI Score combines Value (35%), Quality (30%), Integrity (15%), Growth (12%), and Risk (8%) into a single composite metric.
Risks Hidden in the Financial Statements
Wrap contract counterparty risk. If an insurance company providing wrap contracts fails, the fund could lose its book value guarantee. Financial statements disclose wrap providers but do not rate their creditworthiness. Participants should verify wrap providers carry AA ratings or higher.
Liquidity restrictions. Unlike a money market fund, stable value funds impose transfer restrictions. The financial statements note that participant-directed transfers to "competing" options (money market, short-term bond funds) may be subject to a 90-day equity wash provision.
Crediting rate lag. When market rates rise rapidly, the crediting rate adjusts slowly because it reflects the portfolio's existing bond yields plus wrap economics. The financial statements show historical crediting rates versus market benchmarks.
Plan termination risk. If an employer terminates its retirement plan, stable value participants may receive market value rather than book value for their holdings. This can result in losses during periods of rising interest rates.
Further reading: SEC EDGAR · FRED Economic Data
Related ValueMarkers Resources
- Pe Ratio — Glossary entry for Pe Ratio
- Piotroski F-Score — Piotroski F-Score captures the reliability of reported earnings versus underlying cash flow
- Pb Ratio — Glossary entry for Pb Ratio
- John Hancock Ira — related ValueMarkers analysis
- Johnson Johnson Stock Split — related ValueMarkers analysis
- Dividend Etf Calculator — related ValueMarkers analysis
Frequently Asked Questions
what financial planning is about ontpinvest
Financial planning involves creating a comprehensive strategy for managing income, expenses, savings, and investments to meet life goals. It encompasses retirement planning, tax optimization, estate planning, and risk management. A good financial plan aligns your stable value allocation with your retirement timeline and overall asset allocation targets.
what is financial ratio analysis
Financial ratio analysis is the process of evaluating a company's performance using quantitative metrics derived from its financial statements. Common ratios include P/E ratio (price relative to earnings), P/B ratio (price relative to book value), and ROIC (return on invested capital). For stable value funds, equivalent analysis focuses on crediting rate, duration, and credit quality ratios.
what is book value
Book value represents the net worth of a company or fund, calculated as total assets minus total liabilities. In the context of the John Hancock Stable Value Fund CIT, book value (or contract value) is the amount participants can withdraw, which differs from fair market value due to wrap contracts. The fund's financial statements reconcile these two values each reporting period.
what is a fair value gap
A fair value gap is the difference between a security's market price and its estimated intrinsic worth. For the John Hancock Stable Value Fund CIT, the analogous concept is the market-to-book ratio, which shows how far the underlying bond portfolio's market value sits from the guaranteed contract value. A negative gap (market below book) means wrap contracts are actively subsidizing returns.
what is intrinsic value
Intrinsic value is the present value of all future cash flows an investment will generate. For bonds in a stable value fund, intrinsic value equals the discounted value of remaining coupon payments and principal return. For stocks, intrinsic value requires projecting future free cash flows and discounting them at an appropriate rate, typically 10% for value investors.
how to calculate intrinsic value of share
To calculate intrinsic value, project free cash flow for 10 years, apply a terminal growth rate (typically 2-3%), and discount all cash flows at your required return rate. For example, with JNJ generating $18 billion annually growing at 5%, discounted at 10%, the DCF model produces an intrinsic value estimate. The ValueMarkers DCF calculator automates this process across thousands of stocks.
Take the Next Step
While stable value protects your capital, the equity portion of your portfolio needs rigorous analysis. Use the ValueMarkers Guru Tracker to see what the world's best value investors hold and apply their time-tested screening criteria to your own retirement portfolio.
Written by Javier Sanz, Founder of ValueMarkers
Last updated April 2026
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Disclaimer: This content is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.