First Quarter Update from TIAA-CREF CEO Roger Ferguson
Roger W. Ferguson, Jr.
Dear TIAA-CREF Participant:
How are you feeling about your retirement savings? If you're like many of the clients with whom I've spoken, you're still recovering from the financial shock of 2008. The upturn in markets last year, continuing through the first quarter of 2010, has restored a measure of confidence to investing, yet the outlook for the future is uncertain.
To help you get a better sense of how the market is affecting your savings, let me share a few thoughts on TIAA-CREF's recent performance and on the state of the economy.
Producing Good Investment Returns
Stocks have gained back much of the ground lost in 2008 and early 2009, and TIAA-CREF's broader market returns position us among elite asset managers.
Our Institutional Class Growth & Income Fund was awarded a 2010 Lipper Fund Award for five-year Consistent Return in Lipper's large-cap core category. The award recognizes the fund's strong five-year, risk-adjusted performance for the period ended December 31, 2009. The fund's performance ranked number one out of 655 funds in the Lipper category.i
In addition, the TIAA-CREF Bond Fund was included in Kiplinger's "The Biggest and Best Bond Funds" feature in the March 2010 issue.ii And fully 89 percent of TIAA-CREF funds and variable annuity accounts received an overall Morningstar rating of 3-, 4-, or 5-stars across all asset classes as of March 31, 2010.iii
This record of good performance is even more meaningful when you consider that TIAA-CREF's fees for its annuity accounts and mutual funds are generally half the mutual fund industry average.iv
The ultimate goal of investment performance is retirement security. Income you can't outlive is something many clients look to TIAA-CREF to provide. People who put their retirement savings in a TIAA fixed annuity typically have extra protection against market volatility because of our strong claims-paying ability and long history of keeping our promise to millions of participants.
The guaranteed rate of return offered by the TIAA Traditional Annuity has eased many minds over the past two years.v In December, we were pleased to announce that TIAA Traditional annuitants will receive the same level of income in 2010 that they did in 2009. Against the backdrop of an uncertain economy, that's welcome news for retirees.
Most retirees who receive income from a TIAA-CREF variable annuity and have their income level adjusted annually will see an increase in monthly income beginning May 1. The CREF Money Market Account is an exception because very low interest rates have depressed the fund's value. Also, investors who receive income from the TIAA Real Estate Account will see a decline in monthly income effective May 1, reflecting the broader challenges in the real estate sector.
Changes in the market over the past two years have reinforced the need to maintain a balanced portfolio of stocks, bonds, cash, and alternative investments, all of which help to provide protection in down times and deliver growth and value over the long term.
Making Interactions Smoother
As we strive to deliver the strongest possible returns on your savings, we are also committed to providing you with world-class service. To that end, we continue to upgrade and expand our Web presence, because you've told us you're looking for a better online experience.
If you haven't seen it already, take a look at our new TIAA-CREF.org home page. It's been refreshed and updated to make information easier to find. The revamp marks the beginning of a series of enhancements to help you access your accounts in a more user-friendly format.
You should also visit our Facebook page and our Twitter stream. We are Tweeting every day - after all, what better subject to Tweet about than protecting your nest egg?
We have two additional sites that are focused on getting feedback from you - TC Listens and myretirement.org. TC Listens features discussion forums that allow you to share your thoughts about our Web experience.
Recognizing our strong commitment to online customer engagement, Retirement Income Journal recently called TIAA-CREF "a leader in social media in the retirement space."vi We're honored by the distinction and hope you find our online tools to be helpful to your retirement planning.
Market Outlook
The recent upward trend in financial markets reflects positive indicators in the broader economy. A quarter of the way through 2010, the economy, much like nature, appears to be springing back to life. The path to full recovery will be choppy and some months and quarters will look better than others, but we are headed in the right direction.
Gross domestic product (GDP) improved significantly in the second half of 2009, household wealth has begun to climb again, and low inflation is helping families and businesses cope with the lingering effects of recession. The most recent jobs report also gave reason for cautious optimism.
At TIAA-CREF we're not overly focused on short-term fluctuations in markets or the economy. Our perspective is long-term, because our goal is to help you get to and through retirement. We want to be a trusted partner in your retirement planning - a company you can turn to for stability in challenging times and rely on for strong performance over many years.
Putting Your Interests First
Unlike many financial companies, TIAA-CREF has one goal: your satisfaction. If you're happy with your experience, I encourage you to tell your friends and colleagues about what we offer - recognized performance; objective, noncommissioned advice;vii prudent risk management; and a strong online presence that helps you stay in touch with your savings and with us.
And, as always, if we can make your experience better, please let us know. We value your input and we appreciate your placing your trust in TIAA-CREF.
Sincerely,
Roger W. Ferguson, Jr.
President and Chief Executive Officer
i The highest Lipper leader for consistent return (effective return) within each eligible classification determines the fund classification winner over three, five or ten years. Funds must have at least 36 months of performance history as of the end of the evaluation year. The Growth & Income Fund, Institutional Class, ranked in the 77th percentile within its category over one year, 4th over three years and in the 3rd percentile over five years.
ii "The Biggest and Best Bond Funds and ETFs," Kiplinger's Personal Finance, March 2010.
iii 63% of TIAA-CREF's funds and variable annuity accounts received an overall Morningstar rating of 3 stars, 23% received 4 stars, and 3% received 5 stars across all asset classes as of March 31, 2010. For each fund/account with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's/account's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. Where applicable, Morningstar's performance rankings are based on linked performance that considers the differences in expense ratios, while actual performance data shown does not reflect such differences. The top 10 percent of funds/accounts in a category receive five stars, the next 22.5 percent receive four stars, and the next 35 percent receive three stars, the next 22.5 percent receive two stars and the bottom 10 percent receive one star. (Each share class is counted as a fraction of one fund/account within this scale and rated separately, which may cause slight variations in the distribution percentages. Based on Morningstar data for share classes [not funds] that have completed one calendar year of performance.)
iv Morningstar Direct (December 2009) based on Morningstar expense comparisons by category.
v TIAA Traditional is a guaranteed insurance contract and not an investment for federal securities law purposes. The TIAA Traditional Annuity guarantees principal and a specified interest rate (based on TIAA's claims-paying ability). It also offers the potential for greater growth through additional amounts, which may be declared on a year-by-year basis by the TIAA Board of Trustees. These additional amounts, when declared, remain in effect for the "declaration year" which begins each March 1.
vi "The Future of Online Customer Feedback Has Arrived," Retirement Income Journal, March 3, 2010.
vii TIAA-CREF compensates the advisors through a salary-plus-incentive program based on client service excellence and financial results. Advisors will only recommend products that help achieve our clients' goals.
TIAA-CREF products may be subject to market and other risk factors. See the applicable product literature, or visit www.tiaa-cref.org for details.
Growth stocks may be more volatile than value stocks due to their relatively high valuations, and growth investing may fall out of favor with investors. Bond funds are subject to interest rate and credit risk.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products
