Tuesday, October 26, 2010


Two of the TIAA-CREF funds I am invested in are being frozen which means that I can't transfer money into them in future. I am not clear whether this is a move by TIAA-CREF or just the university where I used to work at. The letter came from the latter.

In place of the CREF Bond Market Fund, they recommend PIMCO Total Return (PTRAX). In place of CREF Global Equities they recommend a 50/50 mix of American Funds EuroPacific Growth Fund (REREX) and Thornburg International Value (THVRX). These non TIAA-CREF funds are supposedly among an array that will be added at the market close on November 19th. I'm not sure that I'll actually be able to switch funds into them as a former employee. We will see. There is a limited range of other TIAA-CREF funds that I might be able to use.

So what do I think of these new non TIAA-CREF funds? I have heard, of course, of the PIMCO Total Return Fund and its manager Bill Gross. It has returned 8.09% p.a. over the last 5 years and 7.66% p.a. over the last 10 years. By comparison the CREF Bond Market Account has returned 4.65% and 5.97%. It's probably riskier than the CREF fund but it has good risk statistics. I would say that an immediate switch is justified here.

I've heard of Thornburg but have no idea if they are good or bad fund managers. The fund is a large cap, growth oriented fund according to Morningstar. Risk stats are good. It has a 5 year return of 6.3%. CREF Global Equities returned -0.05% and has pretty much a beta of 1 and alpha of zero relative to the MSCI World Index. On the other hand Thornburg exactly matched the MSCI's return in 2008 (-41.8%) and underperformed it in 2009. And in the most recent 12 months it maybe underperforms too. The manager paints a better picture than I am getting from Yahoo. So, I'm not sure about this one and won't be looking to switch in a hurry.

The final fund of the three has a good performance record and risk stats and is another large cap fund. It's assets are greater than $100 billion though. Capital Group has a good name. So I wonder if it can maintain the performance it's seen?

Actually the combination of these two funds is not an appropriate replacement for CREF Global Equities. The latter has 46% of assets in US stocks while these two new funds have no US exposure.

In sum these are all plausible to good funds it would seem. I'll look to get into Pimco soon, the others maybe later.

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