1

TIAA-CREF: A BRIEF HISTORYA LOOK AHEAD

Scott Evans

Executive Vice President, Asset Management

TIAA-CREF

October, 2007

2

The TIAA-CREF Experience: Background

• 1905: No higher education retirement system

• TIAA founded in 1918 by Andrew Carnegie (U.S. Steel) as a charitable trust for higher ed, etc.

― National

― Self-funded

― Market risk borne by individuals

― Pooled mortality risk, guaranteed participating annuities

• CREF founded in 1952 as the first variable annuity

• Today:

― ~$450 billion in assets, 15,000 institutional plans, 3.5 million individual participants

3

TIAA-CREF INVESTMENT PHILOSOPHY:

To maximize customers’ savings (rather than fees) by:

Emphasizing theImportance of

asset allocation,diversification, and

rebalancing

Offering pure,fully-invested

low-cost exposure

Seeking to add value through selective active management

alongside afull range of index funds

Seeking to add value through providing unique exposure to

more asset classes

4

TIAA-CREF INVESTMENT OPTIONS

• 1952-1990: TIAA and CREF Stock

― Mandatory Annuitization

• 1990s: Additional Investment Options

― Global Equities, Growth, Equity Index, Social Choice

― Money Market, Bond, Inflation-Linked Bond

― Real Estate

• 2002-2004: 20 Mutual Funds plus Lifecycle Funds

• 2005: Non-proprietary funds introduced

5

TIAA-CREF Life Annuity Income Stream Selection as a Percentage of First Time Participants

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Nu

mb

er o

f Par

ticip

ants

6

Is There a Simple Design That Can Get Them to Want What They Need?

1. Automatic enrollment

- Opt out option to apply to all “automatic” features

2. Automatic default to Lifecycle fund or Balanced fund

3. Compact set of transparent fund choices that provide broad exposure to financial markets

4. Automatic rebalancing

5. Professional fund management that takes advantage of long investment horizon and risk control

6. Low cost

7. Automatic annuitization

7

PENSION DESIGN FOR THE FUTURE

• How close was TIAA-CREF to an ideal balance of individual choice and institutional direction in the 20th Century?

• In the U.S. an increasing realization that unlimited choice produces sub-optimal outcomes

• The Pendulum of Paternalism is Swinging Back

• The popularity of Lifecycle funds shows that simplicity wins – at least at the accumulation stage

• A challenge will be to deliver similar simplicity for the payout stage

8

TIAA-CREF: A BRIEF HISTORYA LOOK AHEAD

Scott Evans

Executive Vice President, Asset Management

TIAA-CREF

October, 2007