CREF Stock Fund Charts

It's your money!

You may be accustomed to mutual fund charts that show investment performance. That's not the point of this site. These charts illustrate show how expenses, paid by participants, are much higher in recent years.

The first chart shows the increasing expense ratios. This is still a low-priced annuity product. But by 2003, the expense ratio was 0.52%. (Note: This chart shows that year's total as 0.48%, because the actual (i.e. experience-adjusted) values of the four sub-components that add up to 0.52% aren't available when the prospectus is issued. You're looking at the prospective figures from the May Prospectuses. I prefer to show a stacked graph of the individual components.) In 2005, all expenses took a huge jump back up.

A similar (but not identical) Vanguard annuity product currently costs 0.50% of net assets! That small difference is despite the fact that Vanguard purchasers are paying a huge 0.20% fee for "insurance" that their Expense Ratio will never go up for the life of their contracts! I'm not suggesting that we should exchange the "at cost" expenses for expensive insurance. This is a very complicated issue. But you should understand that we're currently guaranteeing CREF that we'll cover any increase in the expense ratio! And we have to take their word for it that we're paying "actual expenses". A more conventional Vanguard product, without insurance, costs less than the CREF Stock Fund.

Also keep in mind that when TIAA-CREF opens a branch office near you, "you" pay for it. I keep hoping that the vast number of internet transactions and automated payroll service contributions will decrease costs. But apparently other costs are increasing at a faster rate. (The small blue area on the lower right of the chart is "Acquired Fund Fee Expense", which the SEC has just begun to require reporting separately. It is not a "new" expense.)

The next chart shows an approximation of Net Assets and Net Expenses. (It doesn't use the precise statistics I'd like to have, which aren't in the Prospectus, Average Net Assets, and Total Expenses.) Note that the right and left vertical scales are not the same. That means, for example, that you're more interested in the comparing the slopes of the two lines than in how close they are to each other. What I take away from this chart is that there are no "economies of scale" in the CREF Stock Account!

The third chart uses the same approximation of Net Assets, but the actual Total Investment Advisory fees for each year. It shows that this expense is the one that's been the most out of control. That's also visible in the first chart of ratios, where you see the yellow band getting wider and wider. The left and right vertical scales are again different orders of magnitude. That means that the modest decline in Investment Advisory fees is even more modest than it appears, with respect to the crash in Net Assets! In 2005, the Administrative Expenses took a huge jump. They'll probably say that we were paying for the computer upgrades that aren't working too well!

The following chart is a new observation I've made. It shows that the only thing holding up the Net Assets of the CREF Stock Fund has been the rise in the stock market. In almost every year of the last 13, more money has been taken out of the Accumulation Fund than has been put into it. This suggests that clients are not interested in variable annuities when plain mutual funds are available. Whether they will want to annuitize when they retire remains a long-off future decision.

This last chart is based on my calculated Average Net Assets figure, and CREF's Annual Report figure, Statement of Changes in net assets|From Participant Transactions|Net increase (decrease) in net assets resulting from participant transactions. (This is on page 84 of your paper 2007 CREF Annual Report.) Note that it charts a cumulative number from the left axis, unlike the other charts, which show single annual figures.

Back to Home

Published: February 15, 2004
Modified: June 25, 2009