TIAA-CREF's Sober Approach to Risk Management

As a long-term investor, TIAA-CREF is invested in the equity and fixed income markets, which means we can't avoid market ups and downs.  However, we can and do maintain a sober approach to risk management that can help investors during times of market volatility.

Risk Management at TIAA-CREF reflects a systematic, organization-wide approach to intelligent risk taking and risk-based decision making.  It encompasses such varied areas as operations, business continuity, finance and investment, and entails an ongoing process in which risk managers and investment and business professionals work daily to examine risks to the organization and how they interact. The goal: to assess the return, or reward, for taking certain risks on behalf of the individuals and institutions who entrust their savings to TIAA-CREF.

TIAA-CREF's Risk Management group has enabled the organization to minimize our exposure to products that other financial institutions offered that required those firms to take risk that were not in the long-term financial interest of clients saving for retirement.

• TIAA-CREF has had, and maintains, extremely limited exposure to collateralized debt obligations, structured investment vehicles and other types of highly leveraged securities that have produced large losses for other financial companies.
  
• In 2006, the organization had some investments in sub-prime debt that the company's risk managers decided were susceptible to a downturn in the credit markets. The sale set TIAA-CREF apart from some other financial companies at the time and later helped the organization to minimize its exposure to troubled debt in the months since.
  
• Scenario planning by TIAA-CREF's risk managers over the past five years has contributed to the organization's capital preservation.  TIAA-CREF risk managers maintain a watch list of securities which may be vulnerable to a prolonged downturn, review portfolio concentrations and look for opportunities for diversification.  TIAA-CREF risk managers perform annual exercises to test our ability to continue to operate through natural disasters and other potential business interruptions.

These and other activities enable TIAA-CREF to help individuals meet their long-term financial objectives.  In the short term, sound risk management means that TIAA-CREF has the ample ability to honor participant requests to transfer their funds among equities, fixed income, and other asset classes.

Of one mind about the value of having a plurality of views

TIAA-CREF's Risk Management group includes professionals from such varied backgrounds as finance, economics, insurance, and asset management.  Their approach emphasizes collaboration that draws on the group's diversity and experience. 

It also differs significantly from other financial companies:

• Erwin W. Martens, the head of TIAA-CREF's risk management, reports directly to Roger Ferguson, TIAA-CREF's president and CEO, not to a head of operations, head of asset management, or chief actuary, as is the case at many financial organizations. The reporting structure ensures the independence of risk managers to monitor investment decision making and, when needed, challenge the risk/return judgments made by portfolio managers.
  
• TIAA-CREF's risk managers created a proprietary world-class risk analytics system, which allows them to analyze securities and portfolios in detail and make informed decisions about risks across the organization. By choosing to build its own system rather than purchase a product marketed to multiple institutions, TIAA-CREF is able to acquire unique insights.
  
• A series of risk committees across the organization involve risk managers directly into business decision-making, to encourage active, regular discussions of risk across all initiatives and business activities.

TIAA-CREF's risk managers don't strive to eliminate all risk-taking or to usurp control of the firm's investment or business risk. By design, risk management represents a second opinion when it comes to investment and business decision-making. The tensions created by a plurality of views help TIAA-CREF provide participants with the products, services and long-term return potential they can count on.