Barron's, Wiener: TIAA Going Negative?
Barron's writes that "TIAA Says Negative Yields Could Soon be a Possibility in Money-Market Products." The piece, based on an e-mail sent out by Independent Adviser for Vanguard Investors' editor Dan Wiener, explains, "Negative yields could be a possibility for U.S. investors sooner than expected -- at least, for investors in a couple of money-market products managed by TIAA. In a notice to investors this week, TIAA said it plans to temporarily waive fees on the CREF Money Market Account and TIAA Access's Money-Market Fund.... But notably, TIAA said it would not renew the waiver after the end of 2020. What's more, it said it could recoup those waived fees as soon as next year, if U.S. interest rates rise far enough to provide a positive yield." (Crane Data Note: These are not money market mutual funds, but variable annuity money market products with big extra layers of fees. We do not expect any true money funds to go negative.) Barron's adds, "TIAA's notice marks a significant change from the way most money-market funds managed near-zero interest rates in the years after the 2008-09 financial crisis. Most funds waived fees as long as interest rates were near zero to avoid negative yields." They quote our Peter Crane, "In the money-fund space, people are thinking seriously about negative yields and how they might handle them. The last go-round we merely saw fee waivers, so yields stayed positive.... People are starting to think about what might happen if yields do go full-scale negative. And with funds, how they pass that through to investors -- and how that's perceived -- will be a big deal." Wiener comments in his update, "When I last wrote you about Vanguard's money market yields plunging I had no idea that other fund complexes were already so close to the zero-yield that they'd have to start waiving fees. But that's what's happening. The attached email from TIAA, shared by a colleague, is shocking not only because TIAA says it will only waive fees on its CREF Money Market Account through the end of 2020 but that the yield on the fund could go negative AND TIAA reserves the right to recoup the waived fees down the road.... TIAA investors should begin looking for a better alternative, and for those stuck in 403(b) plans they should be asking their administrators for better alternatives as well."
