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edited January 2013 in Fund Discussions
A residual 403-b residing with a former academic employer has been converted by TIAA-CREF (henceforth TC, if mentioned again) from T Rowe Price (Global Real Estate, Cap Appreciation, New Asia, New Era, High Yield, Dividend Growth, Latin America, Emerging Markets bond, Emerging Markets stock, Emerging Europe, Africa Middle East [if you see a concentration here, this was part of my non-US investment strategy]), to a series of funds with which I'm unfamiliar: American EuroPac Grw R6, Templeton GlobBndAdvClass B, Oakmark Equity and Inc I (OK, I know that one), PIMCO Tot RetFd III Inst B, Vanguard 500 Index Fd Sig, Prudential Natural Res Z, Oppenheimer Dev Market Y, Morgan Stanley Glb RI Est I, and Van Total Int StkIndx Sig.

Most of the new funds seem to have equivalent or somewhat better Morningstar ratings, and I think the people at TC are well-meaning, but I had positive feelings toward TRP, not the least because they gave me free M* premium membership (although I am STILL waiting for their recommended Excelon and Western Union to justify my investments, so maybe I'm better off not having access).

My current employer offers Fidelity and TC as investment options, and I've stayed exclusively with Fidelity, primarily with an offshore stock (mostly Asian) or emerging market bond or floating rate bond preference.

The questions: 1)Should I direct new money partly toward TC instead of all Fidelity (Vanguard is not offered), since there seem to be new options (even tho very few of them are TRP) and, if anyone else in a similar situation has checked out the TC offerings, 2) do they offer a better natural resources fund than Prudential and a better global real estate fund than Morgan Stanley?

If you think this is an abuse of the board, sorry; if you have advice, thanks.



  • TIAA-CREF is a massive organization, and one needs to be careful and precise when discussing their products and services. Without detail, it is difficult if not impossible to offer specific comments. For example, Hank talked about the TIAA-CREF retail mutual fund offerings, which I suspect is not what the OP (STB65) is being offered. (I make that inference from various factoids: 403b plan, class R6 for American Funds [Europacific], Vanguard Signal class, etc.)

    So let me offer a few sweeping statements and guesses. Generally, 403b plans are annuities (even though the law was changed several years ago to allow other types of 403b plans). TIAA-CREF retirement plans are almost exclusively annuities in any case. I don't know what the Fidelity options are. All that said, the wrapper (additional) cost for TIAA-CREF plans are miniscule (my guess is around 10 basis pts). In addition, the fact that R6 share class is being offered says that this is a very large plan, and you are getting extremely low cost share classes of funds.

    I know that because American Funds (which runs the fine EuroPacific fund) offers retirement fund share classes R-1 through R-6. The higher the number, the lower the expense, and the bigger the institution has to be to qualify. Similarly, Vanguard Signal class shares are the some of the cheapest you can get - cheaper than Investor, than Admiral shares. (But Vanguard sometimes has a separate clone fund for institutions that's cheaper still.)

    So we know at least a couple of things - we're talking about a very inexpensive plan, likely cheaper than anything Fidelity has to offer, and we're talking about a wide variety of funds offered, whether through TIAA-CREF or Fidelity, though in either case it's not the whole universe (these are employer-sponsored plans). And this is why offering specific comments is difficult without more details.

    (FWIW, I have posted in the past comparing Fidelity's and TIAA-CREF's retail annuities, and there's no question TIAA-CREF wins hands down for many reasons - cost, performance, variety of offerings, etc. But just as I feel Hank's comments may not be applicable to the OP's question, my own observation about these retail products is likewise not particularly germane.)

    Since this 403b is with a former employer, it seems that the OP would be able to roll it over into an IRA and do anything with it, including setting up the IRA with TRP. But then the OP would lose the access to some excellent institutional share class funds. I can't talk about all of them (don't know the options), but can offer a few comments about the funds mentioned (and two unmentioned).

    TIAA-CREF offers TIAA Real Estate - this is a unique portfolio. TIAA invests directly in real estate - no REIT wrappers, no REOCs; pure real estate, just as an equity mutual fund generally invests directly in stocks. But true mutual funds are prohibited from investing directly in real estate; you can only do this through special plans like the TIAA-CREF 403b. (Investor has pointed this out as well.) TIAA-CREF also offers a fine stable value (traditional annuity) option, though it doesn't sound like the OP is particularly concerned with what to do with cash.

    As to the funds mentioned:

    EuroPacific Growth is the largest international fund in terms of assets ($100B+), yet continues to have excellent performance. To get it without a load, with an ER of 50 basis points, is great.

    Templeton Global Bond - Hasentab is a unique manager - plays currency separately from bonds (so that he may be 20% long in a country's bonds while being 10% short in that country's currency); buys the best bonds the world over based on the bonds themselves, not the countries. No one else like him. Has the freedom to go anywhere, which is why, even though this is a "world" bond fund, it is almost all in EM bonds now (Korea 15%, Hungary 13%, Poland 9%, Mexico, Indonesia, Ukrane each 7%, etc.)

    PIMCO Total Return III - similar to PIMCO Total Return - the country's largest mutual fund; both managed by Bill Gross. Unlike TR, TR II has "only" $4B in assets, giving Gross a little more flexibility. I'm not a fan of his, but obviously many people are - enough to give him almost $1T dollars to manage. Can't argue with the performance numbers Gross continues to put up, despite the occasional slip like 2011.

    Vanguard 500 Index - what is there to say? If one likes S&P index funds, this one costs 5 basis points and one can't beat Vanguard for quality of index fund management or dedication to long term investors (as is typical for retirement plan investors).

    Vanguard Total Int'l Index - Vanguard gradually changed its benchmark. They finally built a fund that includes Canada, EM, smaller companies as well as the usual EAFE components. While one can argue that one wants, say, more EM, if one buys into the index argument that the idea is to buy the whole market, then this may be the best representation of what the world has to offer. Again, Signal class gives you very low ER (16 basis points), fine Vanguard management.

    Don't know as much about the other funds named - they're smaller, typically load only, so off my radar. Would like to know what other choices you have.

  • I totally agree with observations made by @msf. You ended up pretty good set of funds after the conversion. However, I believe you can open an IRA with TRP and rollover your former employee holdings and re-invest in your popular funds again if you wish.

    As for the current employer, you have not mentioned what funds are being offered in each one. For example, can you choose any fund (third party) in Fidelity fund supermarket or you are limited by Fidelity funds. Can you even buy the regular Fidelity funds or only those that Fidelity offers in annuities? Similar for TC? Do you have the option of splitting money between the two? Let us know what options you have.
  • Thanks for all the help. I'll have to see what I can get from TC thru current employer, since the Fidelity funds offered have recently reduced their ER a fraction, but, so far as I can tell there are no non-Fidelity funds offered. If I can get the same funds TC moved me into for new money, it looks like I should divert most new money there. I have some of the TC real estate fund. When I visited the TC website there was no obvious link to a list of non TC funds, which used to be mediocre, the reason I moved as much to TRP as possible, once they were available. I never moved this money to an IRA partly because the paperwork is a hassle and TRP was available. Now these funds look good enough to sit tight.
    So far as annuities, how does TC compare with Vanguard? Fido was a non-starter from the comparisons I saw.
    Thanks again
  • I can only talk about retail deferred variable annuities. Not 403b's, not fixed annuities, not immediate annuities.

    Within that context, Vanguard and TIAA-CREF charge similar amounts, but TIAA-CREF has a much wider range of offerings. Vanguard charges 0.295%/year for the annuity (where the only death benefit is that you get whatever the current value of the annuity is). TIAA-CREF charges 0.50% for annuities under $100K, 0.35% for annuities between $100K and $500K, and 0.25% for larger annuities. But after 10 years, these drop to 0.10%. For a return of premium guarantee (GMDB), Vanguard charges an extra 0.20%; TIAA charges an extra 0.10%.

    Moving past the annuity wrapper, we have the funds themselves. Vanguard offers 17 funds (including a MMF), all Vanguard. That means they're low cost, typically good to excellent 3-5* funds, and a little boring (by that I mean broad based index and other funds; about as esoteric as you get is a junk bond fund and a REIT index fund).

    I agree with Hank's assessment that TIAA-CREF's retail (and annuity) funds are nothing spectacular (albeit cheap). It seems that TIAA recently added half a dozen DFA funds to their annuity, and these are comparable in price to Vanguard funds (but they tend to be more value leaning). In addition, there are a gazillion other funds, some moderately cheap (e.g. PVC Equity Income and MidCap Blend portfolios at 0.48% and 0.55% plus wrapper fee), and others less so (e.g. Royce Microcap at 1.34%). A wide variety of fund and families in all including TIAA, Delaware, DFA, Franklin/Templeton/Mutual, Janus, Prudential, Legg Mason (including Western Asset), MFS, Neuberger Berman, PIMCO, Royce, Wanger (part of Columbia). And it seems they also added this year one T Rowe Price fund - Limited Term Bond Portfolio. Not an equity fund, but hey, at least they have something from TRP.
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