Teachers Fund Is Ready to Move Up a Grade
One of the world’s largest pension funds is one of the biggest new entrants into the retail mutual fund business.
The $190-billion Teachers Insurance and Annuity Assn.-College Retirement Equities Fund is starting six no-load mutual funds. The New York-based nonprofit group has requested regulators’ approval for international stock, growth stock, growth and income, asset allocation, bond and money market funds to be targeted to teachers and researchers at nonprofit educational institutions but available to anyone who wants to invest in them.
“As our customer base continues to grow, TIAA-CREF participants increasingly are looking to us to provide vehicles they can use for their discretionary personal investing and savings needs,” the group said.
Not coincidentally, the funds are a chance for TIAA-CREF to leverage its reputation as it faces increasing competition for the nonprofit worker’s retirement dollar.
The group is “catching up with the 1980s,” said Jennifer Strickland, editor at Morningstar Variable Annuities/Life in Chicago. “They’ve probably not grown as much as they could have” with mutual funds, she said.
A larger asset base would lead to lower management fees involving TIAA-CREF products and give the group more investing clout. TIAA-CREF currently can offer teachers only one product that isn’t part of a retirement plan. That product is an annuity called Teachers Personal Annuity Stock Index Account and invests in a mixture of bonds and stocks tied to the Russell 3,000 stock index.
TIAA-CREF dominated the education market for many years, but companies such as Fidelity Investments have become more aggressive recently in making inroads into that investor niche. In 1991, Fidelity formed a group to concentrate on selling retirement plans to nonprofit institutions, including colleges and universities. Now Fidelity mutual funds are available in retirement plans at 70 of the nation’s 100 largest universities.
The new TIAA-CREF mutual funds will coexist with the retirement accounts as after-tax alternatives for savings and investment for the group’s 1.8 million members.
Analysts expect TIAA-CREF will be able to attract money to its new funds because it is known for low costs and decent performance.
“They have a good reputation on their investment results,” said Michael Lipper, head of fund tracker Lipper Analytical Services in New York.
The group’s existing retirement fund stock portfolio, which invests in both foreign and U.S. companies, had an average annual return of 13.9% in the 10 years ended Dec. 31, 1996. That compares with the average annual return of 15% for the benchmark Standard & Poor’s 500 index, which is composed only of U.S. stocks.
