, CEO of TIAA-CREF, is contemplating a second attempt to gain shareholder approval for a fee increase in its family of actively managed funds for institutions, reported the Wall Street Journal
Thursday. The non-profit fund sponsor last tried to win an increase from fund shareholders in August. It lost that vote for nine funds (and won it for three others) with the boards of 529 college savings plan clients providing much of the opposition.
529 plans were two of those voting against the proposal.
Shareholders of its retail funds approved the addition of marketing fees to those funds. TIAA-CREF also sponsors 11 indexed mutual funds, though it is not seeking any fee increase for those index funds.
The failed measure would have increased the management fees that nine institutional funds pay to TIAA-CREF by two to six times current levels. The New York City-based firm had threatened that it would have to close the funds to new investors or even liquidate them if it was unable to raise their fees. The funds hold $4.6 billion of assets.
Allison reportedly decided that the funds are not viable without a fee increase after he reorganized the firm's financial reporting structure and discovered that the $11.9 billion fund group was losing money. In 2004, the fund group lost as much as $8.4 million on $3.8 million of fee revenue. If the proposed fee increases had been in place, the funds would have earned a $1 million profit.
The paper adds that Allison has met with officials overseeing the 529 plans in three states, including officials in California, in the weeks since the meeting in order to build support for the fee increase. Nancy Jacobs, the independent chair of TIAA-CREF's funds, also sent a letter to those running at least one 529 plan explaining why the increase is needed.
The funds' directors are expected to discuss the issue at a meeting next week.
TIAA-CREF spokesperson Stephanie Cohen Glass told the WSJ that the second vote would be the "best alternative for shareholders and the one that would cause the least disruption."
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