"This action is being taken to align what the actual costs are related to these funds," said Stephanie Cohen Glass, a spokeswoman for the company. "We will remain a low-cost provider, and [costs] are relatively low in comparison to the industry even if this new fee structure is adopted."
The changes primarily affect investors in TIAA-CREF 529 plans. Apparently, the funds have been losing money since they were started in 1999, and the bloodletting has only gotten worse with the recent compliance and regulatory squeeze.
"It has become clear that this situation cannot be sustained," the company stated in a regulatory filing.
In the example of the TIAA-CREF Institutional Small-Cap Equity Fund, retail clients would pay a new 12b-1 fee, intended to recoup marketing costs, with total fees, including waivers, running 85 basis points, up from 30 basis points.
The 12b-1 fees would not kick in until at least April 2007, but are another indication of how TIAA-CREF is undergoing a metamorphosis to enter the mainstream financial services market. Furthermore, the addition of the fee bucks a trend in the industry to drop the fees, which have come under regulatory scrutiny.
The fee hikes are also likely to affect TIAA-CREF's foothold in the 529 plan business. The company, which used to be the clear dominant player in the field, began losing ground as its contract for the New York State plan gave way to low-cost competitor
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
