Vanguard REIT vs TIAA Direct Real Estate

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bogswenbern
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Vanguard REIT vs TIAA Direct Real Estate

Post by bogswenbern »

I have 10% of my portfolio in the Vanguard REIT ETF, but I'm not happy with the correlation with the rest of it including the Vanguard S&P 500, and am wondering if it is too tech-correlated with cell tower, data storage specialized REITs etc. I will have CD's maturing in April and don't really want to reinvest in a low yielding CD. Should I switch to:

10% Vanguard REIT
10% TIAA Real Estate QREARX

20% QREARX

5% Vanguard REIT
15% QREARX

or is QREARX not worth the hassle:

20% Vanguard REIT or 10% Vanguard REIT and keep 10% in CD? Thanks in advance!
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by crefwatch »

Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
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ResearchMed
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by ResearchMed »

crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
Has TIAA ever actually stopped/delayed redemptions from TREA at any time, other than their regular once-per-quarter rule?
If so, when?

RM
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

bogswenbern wrote: Fri Jan 07, 2022 3:18 am I have 10% of my portfolio in the Vanguard REIT ETF, but I'm not happy with the correlation with the rest of it including the Vanguard S&P 500, and am wondering if it is too tech-correlated with cell tower, data storage specialized REITs etc.
Ironically other Bogleheads have complained that the fund is too concentrated in "old economy" REITs. Of course the fund has adjusted with the market caps of REITs.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by crefwatch »

ResearchMed wrote: Fri Jan 07, 2022 9:27 am Has TIAA ever actually stopped/delayed redemptions from TREA at any time, other than their regular once-per-quarter rule?
If so, when?
I can't tell if you mean that question contentiously, but how could I get notified of some aggressive trading duuude's refusal from TIAA, in his personal account? They don't have to, nor would they choose to, disclose such an event.

I said, theoretically, so I was referring to actual language in the prospectus. It says, on page 98, (2021):

TIAA reserves the right to reject any purchase or exchange request with respect to the Account, including when it is believed that a request would be disruptive to the Account’s efficient portfolio management. TIAA also may suspend or terminate your ability to transact in the Account by telephone, fax or over the Internet for any reason, including the prevention of excessive trading. A purchase or exchange request could be rejected or electronic trading privileges could be suspended because of the timing or amount of the investment or because of a TIAA Real Estate Account history of excessive trading by the contract owner. Because TIAA has discretion in applying this policy, it is possible that similar transaction activity could be handled differently because of the surrounding circumstances.

I particularly draw your attention to the words "when it is believed that a request would be disruptive to the Account’s efficient portfolio management." However, the first clause of the same sentence clearly states that there are NO restrictions on TIAA's choices of when to reject a purchase or exchange.

Similar language appears in some open-end mutual fund prospectuses as well. For example, the equally BSD-worthy product, Vanguard Primecap Agressive Growth says,

Please note that Vanguard reserves the right, without notice, to revise or terminate the exchange privilege, limit the amount of any exchange, or reject an exchange, at any time, for any reason.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by bogswenbern »

ResearchMed wrote: Fri Jan 07, 2022 9:27 am
crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
Has TIAA ever actually stopped/delayed redemptions from TREA at any time, other than their regular once-per-quarter rule?
If so, when?

RM
I am still dismayed at the QREARX expense ratio, even though people have said that it also includes fees to manage properties which are hidden in VNQ. I am able to invest in TIAA products from previous employment at educational institutions, and yes the liquidity fee is high but I am more highly annoyed by paying any 12b-1 distribution fee. Any way around this? Other classes such as institutional that have a backdoor to get in? I didn't get a marketing brochure to be interested in QREARX, so I don't want to pay a percentage of funds I invest so TIAA can advertise.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by crefwatch »

At one time in the past, TIAA was proud to have no 12b-1 fees. (However, back in the good/bad old days, they DID have Premium Charges for some products!) While I don't make any apologies for them, they can make a case that recent trends towards open-architecture and vigorous competition between vendors have changed the playing field they faced before, say, 1990. It is fair to say that the [demonic] multi-classing of the CREF accounts can be justified in a similar way.

I'm not saying TIAA should be forever bound by previous research and executive policies, but they once said (tiny citation from a big document):
  • Policyholders and institutions must, at all times, be treated in a manner that will not result in benefiting some economically at the expense of others
TIAA-CREF: The Future Agenda, Report of the Special Trustee Joint Committee, November 18, 1987. TIAA, NYC (page 19)

Of course, one could disingenuously argue that this principle actually means not that there should be only ONE ER, but rather, small institution employees should not get a discount on expenses that does not benefit huge institution Participants. (Ironica Typeface.)

A more useful reply to bogswenbern would be to point out that newer, RC and RCP plans often have substantial "discounts" (wrong word) for some expense ratios because of Plan Servicing Credits. This is a complex topic that, while addressed in plain English, is deep in the background of most plans. As a hint, these plans tend to offer a Vanguard index fund or two, at 0.05%-area ERs. (Which then get Grossed-UP near 0.16% or 0.20%!) But you have to seek out the multi-page discussion of Plan Servicing Credits, and hope the institution shows the actual prospective calculation for the account you are researching.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by Tib »

crefwatch wrote: Fri Jan 07, 2022 9:04 am . . . . many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.
I'm curious why you say that. What's desired from a fixed-income fund is (1) lower volatility than stocks, (2) a real return that's positive even if substantially below that of stocks, and (3) a low correlation with stocks. I'd say that TIAA's Real Estate Account (QREARX) satisfies criteria (1) and (2) to a higher degree than does, say, the Vanguard Total Bond Market Index Fund (BND), while BND better satisfies (3). But QREARX's disadvantage with respect to (3) is offset by its timeability; that adds to its ability to safeguard your portfolio, which is a desideratum for a security held as a complement to stocks.

Of course, QREARX isn't just like a fixed-income fund. But I'd say it's enough like it in crucial respects that it's a worthy alternative to bonds, especially when negative real interest rates reduce the attractiveness of fixed income. I allocate to QREARX whatever I would otherwise allocate (begrudgingly) to bonds.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by bseek »

The Vanguard REIT crushed it last year. 40%

Of course I got annoyed with it in 2020 and bailed on it.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

Tib wrote: Sat Jan 08, 2022 6:18 pm
crefwatch wrote: Fri Jan 07, 2022 9:04 am . . . . many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.
I'm curious why you say that. What's desired from a fixed-income fund is (1) lower volatility than stocks, (2) a real return that's positive even if substantially below that of stocks, and (3) a low correlation with stocks. I'd say that TIAA's Real Estate Account (QREARX) satisfies criteria (1) and (2) to a higher degree than does, say, the Vanguard Total Bond Market Index Fund (BND), while BND better satisfies (3). But QREARX's disadvantage with respect to (3) is offset by its timeability; that adds to its ability to safeguard your portfolio, which is a desideratum for a security held as a complement to stocks.

Of course, QREARX isn't just like a fixed-income fund. But I'd say it's enough like it in crucial respects that it's a worthy alternative to bonds, especially when negative real interest rates reduce the attractiveness of fixed income. I allocate to QREARX whatever I would otherwise allocate (begrudgingly) to bonds.
I disagree with being able to time the fund successfully. Yes, there was one instance during the financial crisis when you can argue timing was possible, and some people did time the fund successfully then. But when you look at the disarray over at the Morningstar forum over the situation in 2020, I think that's the more common case. We had people reading the same tea leaves (Greenstreet, etc.) and some deciding to stay in, some deciding to get out, and some ending up half-in and half-out. And it was like that with getting back in. Yet if you had asked before that, all of them would have said timing would have been obvious. Similarly, we had posts here before the financial crisis characterizing the fund as almost like a higher-yielding version of Traditional. And it was, until it wasn't.

TIAA provides an excellent fixed income fund alternative in Traditional. Right now it, and pretty much everything else isn't keeping up with inflation, but there have been periods when TIAA Real Estate didn't either.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by Tib »

The account has moved in long, slow up-phases and down-phases. The timing strategy most often mentioned is to get out/in when and only when there's a 3% fall/rise from the highest/lowest point attained thus far in the present phase. Never in the history of the fund has this strategy gotten an investor out/in too early. And never more than 3% down/up from the peak/trough. Not everyone is aware of this strategy. And during 2020, many of those who are aware of it (me included) were sure (though wrong) that the account soon would be down 3% and bailed. But, and this is important, because the account is so slow-moving they lost nothing significant, just months of essentially sideways movement. Those who dared (me included) used some of the proceeds of the sale of QREARX to rebalance into stocks. Of course, that worked well. Once the sideways movement was replaced by an uptrend totaling 2%-3%, I and some others got back in---and have enjoyed (even if we haven't really understood) the party that followed. As did those who followed the strategy and never got out.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

Tib wrote: Sat Jan 08, 2022 8:58 pm The account has moved in long, slow up-phases and down-phases. The timing strategy most often mentioned is to get out/in when and only when there's a 3% fall/rise from the highest/lowest point attained thus far in the present phase. Never in the history of the fund has this strategy gotten an investor out/in too early. And never more than 3% down/up from the peak/trough. Not everyone is aware of this strategy. And during 2020, many of those who are aware of it (me included) were sure (though wrong) that the account soon would be down 3% and bailed. But, and this is important, because the account is so slow-moving they lost nothing significant, just months of essentially sideways movement. Those who dared (me included) used some of the proceeds of the sale of QREARX to rebalance into stocks. Of course, that worked well. Once the sideways movement was replaced by an uptrend totaling 2%-3%, I and some others got back in---and have enjoyed (even if we haven't really understood) the party that followed. As did those who followed the strategy and never got out.
Actually everyone is aware of the strategy, although as evidenced by the debates at the time, not everyone agrees on the details or has the confidence you do that past performance will repeat. We'll have to agree to disagree that using a timing strategy with the fund is a suitable replacement for fixed income.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by Tib »

tibbitts: "Actually everyone is aware of the strategy, although as evidenced by the debates at the time, not everyone agrees on the details or has the confidence you do that past performance will repeat. We'll have to agree to disagree that using a timing strategy with the fund is a suitable replacement for fixed income."

You're right that there is no assurance that the 3% strategy will continue to work. But real-estate prices have long exhibited a pattern of lengthy, quite smooth rises, with retracements of less than 3%, terminating with quite smooth declines of much more than 3%. See this Green Street graph:

https://www.greenstreet.com/insights/CPPI

So, there seems to be a good chance that the 3% strategy will continue to work. Even apart from this, I think QREARX is a fine substitute for some or all of one's bonds, especially when real interest rates are negative. That's because of its record of lower volatility and higher returns. To see the stark difference in volatility between QREARX and BND, compare these 5-year price-graphs:

https://www.cnbc.com/quotes/QREARX

https://www.cnbc.com/quotes/bnd?qsearchterm=bnd


To see the sizable difference in trailing returns, see:

https://www.quicken.com/investing/mutua ... te-Account

https://investor.vanguard.com/etf/profi ... rmance/bnd
Last edited by Tib on Sun Jan 09, 2022 6:23 pm, edited 3 times in total.
talzara
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by talzara »

bogswenbern wrote: Fri Jan 07, 2022 12:54 pm I am still dismayed at the QREARX expense ratio, even though people have said that it also includes fees to manage properties which are hidden in VNQ. I am able to invest in TIAA products from previous employment at educational institutions, and yes the liquidity fee is high but I am more highly annoyed by paying any 12b-1 distribution fee.
The TREA expense ratio does not include property management fees. It does include investment management fees, such as the cost to do due diligence on properties that are being purchased. These active management fees are reported at the REIT level in the Vanguard fund.

The administrative and distribution charges are higher than the Vanguard fund. TIAA just isn't as efficient as Vanguard.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

talzara wrote: Sun Jan 09, 2022 1:12 pm
bogswenbern wrote: Fri Jan 07, 2022 12:54 pm I am still dismayed at the QREARX expense ratio, even though people have said that it also includes fees to manage properties which are hidden in VNQ. I am able to invest in TIAA products from previous employment at educational institutions, and yes the liquidity fee is high but I am more highly annoyed by paying any 12b-1 distribution fee.
The TREA expense ratio does not include property management fees. It does include investment management fees, such as the cost to do due diligence on properties that are being purchased. These active management fees are reported at the REIT level in the Vanguard fund.

The administrative and distribution charges are higher than the Vanguard fund. TIAA just isn't as efficient as Vanguard.
Did someone in another thread (maybe you?) calculate the effective (vs. a REIT fund) expense ratio of the TIAA fund at something in the .5% range? In any case it would still be enough to be a bridge just too far for some Bogleheads. I recall that the TIAA fund reported expenses were lower some some years ago (in the upper .5% range I think), maybe before some of the financial-crisis-related changes.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by talzara »

tibbitts wrote: Sun Jan 09, 2022 2:07 pm Did someone in another thread (maybe you?) calculate the effective (vs. a REIT fund) expense ratio of the TIAA fund at something in the .5% range? In any case it would still be enough to be a bridge just too far for some Bogleheads. I recall that the TIAA fund reported expenses were lower some some years ago (in the upper .5% range I think), maybe before some of the financial-crisis-related changes.
Yes, that was me, and I was replying to you.

TREA's effective expense ratio is 0.32% to 0.58%, depending on how much you think the liquidity guarantee is worth:
talzara wrote: Sun Apr 04, 2021 12:48 pm If you believe that the liquidity guarantee is worthless because Vanguard gets liquidity for free, then TREA's expense ratio is 0.58%. This is much higher than the Vanguard Real Estate Index Fund's expense ratio of 0.12%.

If you believe that the liquidity guarantee is worth 0.28% because it guarantees NAV, then TREA's expense ratio is 0.32%. This is still higher than Vanguard Real Estate's 0.12%.

viewtopic.php?p=5923792#p5923792
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

talzara wrote: Sun Jan 09, 2022 2:37 pm
tibbitts wrote: Sun Jan 09, 2022 2:07 pm Did someone in another thread (maybe you?) calculate the effective (vs. a REIT fund) expense ratio of the TIAA fund at something in the .5% range? In any case it would still be enough to be a bridge just too far for some Bogleheads. I recall that the TIAA fund reported expenses were lower some some years ago (in the upper .5% range I think), maybe before some of the financial-crisis-related changes.
Yes, that was me, and I was replying to you.

TREA's effective expense ratio is 0.32% to 0.58%, depending on how much you think the liquidity guarantee is worth:
talzara wrote: Sun Apr 04, 2021 12:48 pm If you believe that the liquidity guarantee is worthless because Vanguard gets liquidity for free, then TREA's expense ratio is 0.58%. This is much higher than the Vanguard Real Estate Index Fund's expense ratio of 0.12%.

If you believe that the liquidity guarantee is worth 0.28% because it guarantees NAV, then TREA's expense ratio is 0.32%. This is still higher than Vanguard Real Estate's 0.12%.

viewtopic.php?p=5923792#p5923792
Thanks, again. So far more expensive than what many Bogleheads would ever accept, but somewhat low in comparison to a typical active REIT fund.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by bogswenbern »

tibbitts wrote: Fri Jan 07, 2022 9:42 am
bogswenbern wrote: Fri Jan 07, 2022 3:18 am I have 10% of my portfolio in the Vanguard REIT ETF, but I'm not happy with the correlation with the rest of it including the Vanguard S&P 500, and am wondering if it is too tech-correlated with cell tower, data storage specialized REITs etc.
Ironically other Bogleheads have complained that the fund is too concentrated in "old economy" REITs. Of course the fund has adjusted with the market caps of REITs.
At first this comment changed my thinking a bit, but then more thought and wouldn't it be better to just invest more in the SP500 aka tech stocks then a "new economy" REIT ETF? There has been such strong correlation between VOO and VNQ with all of this recent volatility, but QREARX just keeps chugging.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by crefwatch »

tibbitts wrote: Sun Jan 09, 2022 2:07 pm Did someone in another thread (maybe you?) calculate the effective (vs. a REIT fund) expense ratio of the TIAA fund at something in the .5% range? In any case it would still be enough to be a bridge just too far for some Bogleheads. I recall that the TIAA fund reported expenses were lower some some years ago (in the upper .5% range I think), maybe before some of the financial-crisis-related changes.
I don't understand what the value of this egghead computation is. As a matter of cash, the ER of the TIAA Real Estate Fund is currently 0.87%, and that doesn't include brokerage commissions or real estate management company fees.

I don't like the statement (elsewhere) that the TIAA Real Estate's Liquidity Guarantee guarantees NAV. Since it takes at least a calendar quarter to re-appraise all of the property in the account, the NAV on any given day is an approximation. Maybe it's a good one. But the liquidity guarantee guarantees .... liquidity. That's all. (TIAA eventually made money buy reacquiring a lot of shares/units individual investors dumped in the Great Recession .... ... It's always the same story about market timers, isn't it?)

It is not fair to compare the efficiency of operating a fund of widely traded stocks with the efficiency of managing a fund of actual real estate, mortgages, partnerships, mezzanine loans, joint ventures, and a little dash of REITS. Vanguard doesn't get all the "credit" for having a lower ER. The two funds are simply not comparable.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

crefwatch wrote: Tue Jan 25, 2022 12:41 pm I don't understand what the value of this egghead computation is. As a matter of cash, the ER of the TIAA Real Estate Fund is currently 0.87%, and that doesn't include brokerage commissions or real estate management company fees.
The value is simply that some people have a maximum effective expense ratio that they'll pay. Some might pay .5% but not .87%. It's not unreasonable to say that with TIAA the appropriate comparison is probably closer than .1x% vs. .87% might suggest. Personally I don't weigh the .87% that much in deciding how much TIAA RE to hold in my own account, but I might invest a little more if the expenses (including all the elements that are included now) were .5% or something, just because the potential returns would be that much higher.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

bogswenbern wrote: Tue Jan 25, 2022 12:12 pm
tibbitts wrote: Fri Jan 07, 2022 9:42 am
bogswenbern wrote: Fri Jan 07, 2022 3:18 am I have 10% of my portfolio in the Vanguard REIT ETF, but I'm not happy with the correlation with the rest of it including the Vanguard S&P 500, and am wondering if it is too tech-correlated with cell tower, data storage specialized REITs etc.
Ironically other Bogleheads have complained that the fund is too concentrated in "old economy" REITs. Of course the fund has adjusted with the market caps of REITs.
At first this comment changed my thinking a bit, but then more thought and wouldn't it be better to just invest more in the SP500 aka tech stocks then a "new economy" REIT ETF? There has been such strong correlation between VOO and VNQ with all of this recent volatility, but QREARX just keeps chugging.
I don't know that it's reasonable to draw many conclusions from QREARX "chugging", because the recent volatility hasn't lasted long enough to know what if any effects there will be on the TIAA fund. Nobody would expect a REIT fund to not be subject to the minute-by-minute whims of the equity markets, while a delayed reaction is just the nature of the TIAA fund. Obviously you've seen the TIAA fund lose a large percentage of its value over a relatively short time - just with that "relatively short time" being months, not days (or hours.) And you've seen it continue to lose value while REITS were climbing significantly.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by abuss368 »

bogswenbern wrote: Fri Jan 07, 2022 3:18 am I have 10% of my portfolio in the Vanguard REIT ETF, but I'm not happy with the correlation with the rest of it including the Vanguard S&P 500, and am wondering if it is too tech-correlated with cell tower, data storage specialized REITs etc. I will have CD's maturing in April and don't really want to reinvest in a low yielding CD. Should I switch to:

10% Vanguard REIT
10% TIAA Real Estate QREARX

20% QREARX

5% Vanguard REIT
15% QREARX

or is QREARX not worth the hassle:

20% Vanguard REIT or 10% Vanguard REIT and keep 10% in CD? Thanks in advance!
What are you looking for? Real estate? A higher yield to generate additional portfolio income?
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by grok87 »

I own Vanguard REIT (VNQ) and TIAA Direct Real Estate (QREARX). The thing that bothers me most about QREARX is manager risk.

I once read the thoughts of the manager (name?). He said he was overweighting coastal real estate and hated the midwest. the fund documents bear that out. Fair enough. but what if he's wrong? with vnq i know i have the market's view (wisdom of crowds) rather than just one guy.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

grok87 wrote: Tue Jan 25, 2022 7:39 pm I own Vanguard REIT (VNQ) and TIAA Direct Real Estate (QREARX). The thing that bothers me most about QREARX is manager risk.

I once read the thoughts of the manager (name?). He said he was overweighting coastal real estate and hated the midwest. the fund documents bear that out. Fair enough. but what if he's wrong? with vnq i know i have the market's view (wisdom of crowds) rather than just one guy.
I wasn't enthusiastic about the coastal strategy shift, although that's been for quite a few years now. Also I believe they previously had more (although not much of) an international representation. It seems like the idea would be to have more not less diversification. But I don't know how to benchmark the fund, since it obviously can't be compared to a REIT fund.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by finite_difference »

For diversification I would go 10% VG REIT and 10% TREA.

I would consider both of these riskier than CDs though. To replace CDs maybe consider 6% LTT, 7% VWIUX, 7% TIPS.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by grok87 »

tibbitts wrote: Tue Jan 25, 2022 8:03 pm
grok87 wrote: Tue Jan 25, 2022 7:39 pm I own Vanguard REIT (VNQ) and TIAA Direct Real Estate (QREARX). The thing that bothers me most about QREARX is manager risk.

I once read the thoughts of the manager (name?). He said he was overweighting coastal real estate and hated the midwest. the fund documents bear that out. Fair enough. but what if he's wrong? with vnq i know i have the market's view (wisdom of crowds) rather than just one guy.
I wasn't enthusiastic about the coastal strategy shift, although that's been for quite a few years now. Also I believe they previously had more (although not much of) an international representation. It seems like the idea would be to have more not less diversification. But I don't know how to benchmark the fund, since it obviously can't be compared to a REIT fund.
re "how to benchmark the fund" you may be interested in TIAA's views on this topic
https://www.tiaa.org/public/pdf/reports ... ateQPA.pdf
cheers,
grok
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

grok87 wrote: Tue Jan 25, 2022 8:50 pm
tibbitts wrote: Tue Jan 25, 2022 8:03 pm
grok87 wrote: Tue Jan 25, 2022 7:39 pm I own Vanguard REIT (VNQ) and TIAA Direct Real Estate (QREARX). The thing that bothers me most about QREARX is manager risk.

I once read the thoughts of the manager (name?). He said he was overweighting coastal real estate and hated the midwest. the fund documents bear that out. Fair enough. but what if he's wrong? with vnq i know i have the market's view (wisdom of crowds) rather than just one guy.
I wasn't enthusiastic about the coastal strategy shift, although that's been for quite a few years now. Also I believe they previously had more (although not much of) an international representation. It seems like the idea would be to have more not less diversification. But I don't know how to benchmark the fund, since it obviously can't be compared to a REIT fund.


re "how to benchmark the fund" you may be interested in TIAA's views on this topic
https://www.tiaa.org/public/pdf/reports ... ateQPA.pdf
cheers,
grok
Thanks, I hadn't seen that before, although after reading it a couple of times I'm still not any more or less confident about the fund management. I think I have the correct amount in the fund to where I'm okay with just accepting whatever results the fund gives.

Meanwhile, I just logged in to the TIAA website, and noticed that my "Your Projected Income" on the landing page, which is calculated using almost no parameters that actually apply to me, has dropped by about 2%. The estimate is seemingly only updated every few months (it stays exactly the same from day to day), and most recently had increased by about 1% a few months ago. I believe the calculation actually does incorporate my asset mix, about 94% Traditional and 6% Real Estate, which hasn't changed in a while, so it was interesting to see such a large drop in projected income.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by abuss368 »

grok87 wrote: Tue Jan 25, 2022 7:39 pm I own Vanguard REIT (VNQ) and TIAA Direct Real Estate (QREARX). The thing that bothers me most about QREARX is manager risk.

I once read the thoughts of the manager (name?). He said he was overweighting coastal real estate and hated the midwest. the fund documents bear that out. Fair enough. but what if he's wrong? with vnq i know i have the market's view (wisdom of crowds) rather than just one guy.
Have you reviewed or considered investing in real estate crowdfunding such as Fundrise? Fundrise has the opposite view with less opportunity on the coast and more towards the heartland.

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by bogswenbern »

tibbitts wrote: Tue Jan 25, 2022 1:51 pm
bogswenbern wrote: Tue Jan 25, 2022 12:12 pm
tibbitts wrote: Fri Jan 07, 2022 9:42 am
bogswenbern wrote: Fri Jan 07, 2022 3:18 am I have 10% of my portfolio in the Vanguard REIT ETF, but I'm not happy with the correlation with the rest of it including the Vanguard S&P 500, and am wondering if it is too tech-correlated with cell tower, data storage specialized REITs etc.
Ironically other Bogleheads have complained that the fund is too concentrated in "old economy" REITs. Of course the fund has adjusted with the market caps of REITs.
At first this comment changed my thinking a bit, but then more thought and wouldn't it be better to just invest more in the SP500 aka tech stocks then a "new economy" REIT ETF? There has been such strong correlation between VOO and VNQ with all of this recent volatility, but QREARX just keeps chugging.
I don't know that it's reasonable to draw many conclusions from QREARX "chugging", because the recent volatility hasn't lasted long enough to know what if any effects there will be on the TIAA fund. Nobody would expect a REIT fund to not be subject to the minute-by-minute whims of the equity markets, while a delayed reaction is just the nature of the TIAA fund. Obviously you've seen the TIAA fund lose a large percentage of its value over a relatively short time - just with that "relatively short time" being months, not days (or hours.) And you've seen it continue to lose value while REITS were climbing significantly.
I'm ecstatic that I had 10% in VNQ last year, but when my CD's mature I am just having a hard time deciding whether to add to VNQ or QREARX or get new CD's. I have a few months to think about this. This market seems so clearly Fed driven. Whatever effects unexpected interest rate hikes have on the SP500 (Apple, MSFT, etc) seem to be the same or magnified on VNQ (leveraged cell tower and data storage REITS etc). QREARX has manager risk, and hassles. CD's don't pay any interest.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by bogswenbern »

abuss368 wrote: Tue Jan 25, 2022 7:05 pm
bogswenbern wrote: Fri Jan 07, 2022 3:18 am I have 10% of my portfolio in the Vanguard REIT ETF, but I'm not happy with the correlation with the rest of it including the Vanguard S&P 500, and am wondering if it is too tech-correlated with cell tower, data storage specialized REITs etc. I will have CD's maturing in April and don't really want to reinvest in a low yielding CD. Should I switch to:

10% Vanguard REIT
10% TIAA Real Estate QREARX

20% QREARX

5% Vanguard REIT
15% QREARX

or is QREARX not worth the hassle:

20% Vanguard REIT or 10% Vanguard REIT and keep 10% in CD? Thanks in advance!
What are you looking for? Real estate? A higher yield to generate additional portfolio income?
I have plenty of tax sheltered space, am 48 years old, and just looking for total return and not income necessarily. I've read David Swensen's book which has a 20% allocation to real estate and follow White Coat Investor's blog (also 20% real estate)
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

bogswenbern wrote: Tue Jan 25, 2022 10:32 pm
tibbitts wrote: Tue Jan 25, 2022 1:51 pm
bogswenbern wrote: Tue Jan 25, 2022 12:12 pm
tibbitts wrote: Fri Jan 07, 2022 9:42 am
bogswenbern wrote: Fri Jan 07, 2022 3:18 am I have 10% of my portfolio in the Vanguard REIT ETF, but I'm not happy with the correlation with the rest of it including the Vanguard S&P 500, and am wondering if it is too tech-correlated with cell tower, data storage specialized REITs etc.
Ironically other Bogleheads have complained that the fund is too concentrated in "old economy" REITs. Of course the fund has adjusted with the market caps of REITs.
At first this comment changed my thinking a bit, but then more thought and wouldn't it be better to just invest more in the SP500 aka tech stocks then a "new economy" REIT ETF? There has been such strong correlation between VOO and VNQ with all of this recent volatility, but QREARX just keeps chugging.
I don't know that it's reasonable to draw many conclusions from QREARX "chugging", because the recent volatility hasn't lasted long enough to know what if any effects there will be on the TIAA fund. Nobody would expect a REIT fund to not be subject to the minute-by-minute whims of the equity markets, while a delayed reaction is just the nature of the TIAA fund. Obviously you've seen the TIAA fund lose a large percentage of its value over a relatively short time - just with that "relatively short time" being months, not days (or hours.) And you've seen it continue to lose value while REITS were climbing significantly.
I'm ecstatic that I had 10% in VNQ last year, but when my CD's mature I am just having a hard time deciding whether to add to VNQ or QREARX or get new CD's. I have a few months to think about this. This market seems so clearly Fed driven. Whatever effects unexpected interest rate hikes have on the SP500 (Apple, MSFT, etc) seem to be the same or magnified on VNQ (leveraged cell tower and data storage REITS etc). QREARX has manager risk, and hassles. CD's don't pay any interest.
It seems like you're just relating why there are so many forecasts for reduced returns from essentially every asset class going forward. There can be times when no reasonably prudent path will produce positive returns for an extended period; maybe this is one of those times.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by grok87 »

abuss368 wrote: Tue Jan 25, 2022 9:45 pm
grok87 wrote: Tue Jan 25, 2022 7:39 pm I own Vanguard REIT (VNQ) and TIAA Direct Real Estate (QREARX). The thing that bothers me most about QREARX is manager risk.

I once read the thoughts of the manager (name?). He said he was overweighting coastal real estate and hated the midwest. the fund documents bear that out. Fair enough. but what if he's wrong? with vnq i know i have the market's view (wisdom of crowds) rather than just one guy.
Have you reviewed or considered investing in real estate crowdfunding such as Fundrise? Fundrise has the opposite view with less opportunity on the coast and more towards the heartland.

Best.
Tony
thanks Tony. i went to their website. looks like a private REIT which IMHO are mostly scams

"While Fundrise should be viewed as a long-term investment, we understand that investors may want or need to prematurely liquidate (or "redeem") their shares. Accordingly, our investors may request to redeem shares at any time, although such redemption cannot be guaranteed — especially in times of economic uncertainty — and there may be costs associated with premature redemption."

cheers,
grok
RIP Mr. Bogle.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tj »

tibbitts wrote: Sat Jan 08, 2022 7:31 pm
Tib wrote: Sat Jan 08, 2022 6:18 pm
crefwatch wrote: Fri Jan 07, 2022 9:04 am . . . . many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.
I'm curious why you say that. What's desired from a fixed-income fund is (1) lower volatility than stocks, (2) a real return that's positive even if substantially below that of stocks, and (3) a low correlation with stocks. I'd say that TIAA's Real Estate Account (QREARX) satisfies criteria (1) and (2) to a higher degree than does, say, the Vanguard Total Bond Market Index Fund (BND), while BND better satisfies (3). But QREARX's disadvantage with respect to (3) is offset by its timeability; that adds to its ability to safeguard your portfolio, which is a desideratum for a security held as a complement to stocks.

Of course, QREARX isn't just like a fixed-income fund. But I'd say it's enough like it in crucial respects that it's a worthy alternative to bonds, especially when negative real interest rates reduce the attractiveness of fixed income. I allocate to QREARX whatever I would otherwise allocate (begrudgingly) to bonds.
I disagree with being able to time the fund successfully. Yes, there was one instance during the financial crisis when you can argue timing was possible, and some people did time the fund successfully then. But when you look at the disarray over at the Morningstar forum over the situation in 2020, I think that's the more common case. We had people reading the same tea leaves (Greenstreet, etc.) and some deciding to stay in, some deciding to get out, and some ending up half-in and half-out. And it was like that with getting back in. Yet if you had asked before that, all of them would have said timing would have been obvious. Similarly, we had posts here before the financial crisis characterizing the fund as almost like a higher-yielding version of Traditional. And it was, until it wasn't.

TIAA provides an excellent fixed income fund alternative in Traditional. Right now it, and pretty much everything else isn't keeping up with inflation, but there have been periods when TIAA Real Estate didn't either.
The problem with TIAA Traditional is that the yield on IRA is drastically lower than the employer plans. As a federal employee, I can open an IRA at TIAA, the Real Estate Account is the same in IRA's vs employer plans, but the TIAA Traditional is drastically worse.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by crefwatch »

tj wrote: Wed Jan 26, 2022 9:35 am The problem with TIAA Traditional is that the yield on IRA is drastically lower than the employer plans. As a federal employee, I can open an IRA at TIAA, the Real Estate Account is the same in IRA's vs employer plans, but the TIAA Traditional is drastically worse.
This observation is 100% correct, and important. But what is a conservative investor to do? Should they buy a bond index fund that currently yields 1.67% but will lose principal if interest rates go up? Or should they buy TIAA Traditional paying 1.50% with no risk to principal?

(I might well have moved my IRA out of TIAA long ago, if it hadn't had a 3% Traditional guarantee. Now, of course, only my "old money" in Traditional earns 3% in that IRA. Past performance is no guarantee, but my 50 years in the product tells me that if the Fed raises interest rates, the next reset of TIAA Traditional interest rates will not be downward.)
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

tj wrote: Wed Jan 26, 2022 9:35 am The problem with TIAA Traditional is that the yield on IRA is drastically lower than the employer plans. As a federal employee, I can open an IRA at TIAA, the Real Estate Account is the same in IRA's vs employer plans, but the TIAA Traditional is drastically worse.
As a federal employee your employer plan and benefits in general are by no means typical of employer plans, so not everyone will have a guaranteed employer option currently paying more than the current TIAA IRA 1.5% rate as you do, much less more than the 3% (minimum) rate on some TIAA employer plans. As a federal employee, once you've maxed the contributions to your TSP employer plan, maybe you have IRA investment options available that most people don't. I was never a federal employee so don't have any knowledge of plan provisions, but you can only compare the TIAA IRA rate to the rate available to you on IRA contributions, not for your employer contributions.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by abuss368 »

grok87 wrote: Wed Jan 26, 2022 6:41 am
abuss368 wrote: Tue Jan 25, 2022 9:45 pm
grok87 wrote: Tue Jan 25, 2022 7:39 pm I own Vanguard REIT (VNQ) and TIAA Direct Real Estate (QREARX). The thing that bothers me most about QREARX is manager risk.

I once read the thoughts of the manager (name?). He said he was overweighting coastal real estate and hated the midwest. the fund documents bear that out. Fair enough. but what if he's wrong? with vnq i know i have the market's view (wisdom of crowds) rather than just one guy.
Have you reviewed or considered investing in real estate crowdfunding such as Fundrise? Fundrise has the opposite view with less opportunity on the coast and more towards the heartland.

Best.
Tony
thanks Tony. i went to their website. looks like a private REIT which IMHO are mostly scams

"While Fundrise should be viewed as a long-term investment, we understand that investors may want or need to prematurely liquidate (or "redeem") their shares. Accordingly, our investors may request to redeem shares at any time, although such redemption cannot be guaranteed — especially in times of economic uncertainty — and there may be costs associated with premature redemption."

cheers,
grok
I agree and took a pass. Although there are Bogleheads who post that they invest with Fundrise.

I try to keep it simple. Total Market investing.
Tony
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tj »

tibbitts wrote: Wed Jan 26, 2022 10:57 am
tj wrote: Wed Jan 26, 2022 9:35 am The problem with TIAA Traditional is that the yield on IRA is drastically lower than the employer plans. As a federal employee, I can open an IRA at TIAA, the Real Estate Account is the same in IRA's vs employer plans, but the TIAA Traditional is drastically worse.
As a federal employee your employer plan and benefits in general are by no means typical of employer plans, so not everyone will have a guaranteed employer option currently paying more than the current TIAA IRA 1.5% rate as you do, much less more than the 3% (minimum) rate on some TIAA employer plans. As a federal employee, once you've maxed the contributions to your TSP employer plan, maybe you have IRA investment options available that most people don't. I was never a federal employee so don't have any knowledge of plan provisions, but you can only compare the TIAA IRA rate to the rate available to you on IRA contributions, not for your employer contributions.
It has absolutely nothing to do with my employer contributions which of course go in the TSP.

https://www.tiaa.org/public/pdf/eligibi ... ternal.pdf

Being a federal employee is simply what would allow me to contribute to TIAA Traditional or TIAA Real Estate Account annuities, if not for that, pretty sure i'd be locked out altogether.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by Dave55 »

crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
I think the Morningstar Forum was shut down.

Dave
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by ResearchMed »

Dave55 wrote: Thu Jan 27, 2022 9:02 am
crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
I think the Morningstar Forum was shut down.

Dave
Was it shut down?
Or was it changed so it became exceedingly user unfriendly, and thus very infrequently used, compared with "before'?

RM
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tj »

Dave55 wrote: Thu Jan 27, 2022 9:02 am
crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
I think the Morningstar Forum was shut down.

Dave
I thought they just transitioned to a new forum software? Or the 2nd one closed too?
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by Dave55 »

ResearchMed wrote: Thu Jan 27, 2022 9:06 am
Dave55 wrote: Thu Jan 27, 2022 9:02 am
crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
I think the Morningstar Forum was shut down.

Dave
Was it shut down?
Or was it changed so it became exceedingly user unfriendly, and thus very infrequently used, compared with "before'?

RM
I just logged in and the site said URL no longer exits. I think some of the posters migrated to armchair investing.

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by Dave55 »

tj wrote: Thu Jan 27, 2022 9:06 am
Dave55 wrote: Thu Jan 27, 2022 9:02 am
crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
I think the Morningstar Forum was shut down.

Dave
I thought they just transitioned to a new forum software? Or the 2nd one closed too?
That could be, but do you have a link?

Dave
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by ResearchMed »

Dave55 wrote: Thu Jan 27, 2022 9:08 am
ResearchMed wrote: Thu Jan 27, 2022 9:06 am
Dave55 wrote: Thu Jan 27, 2022 9:02 am
crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
I think the Morningstar Forum was shut down.

Dave
Was it shut down?
Or was it changed so it became exceedingly user unfriendly, and thus very infrequently used, compared with "before'?

RM
I just logged in and the site said URL no longer exits. I think some of the posters migrated to armchair investing.

Dave
Still there:

https://community.morningstar.com/s/top ... ing-forums

VERY low usage, few posts and almost no replies to any of them.

RM
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by Dave55 »

ResearchMed wrote: Thu Jan 27, 2022 9:11 am
Dave55 wrote: Thu Jan 27, 2022 9:08 am
ResearchMed wrote: Thu Jan 27, 2022 9:06 am
Dave55 wrote: Thu Jan 27, 2022 9:02 am
crefwatch wrote: Fri Jan 07, 2022 9:04 am Have you actually studied the portfolio holding categories of the Vanguard product to see how the assets are distributed?

You may wish to search the Morningstar TIAA board. There are many discussions of your OP there. I should add that many posters there believe that the TIAA Real Estate Account (TIAA RE) is so much less volatile than a REIT fund that it can almost be considered like a fixed income fund. I (opinion) consider that delusional.

I'm referring to how long it takes to value all of the properties (i.e. months ...) of a fund which is priced daily. Note that the expenses for this fund include a huge fee to guarantee your liquidity, and to pay for an independent fiduciary (because, for example, you are competing with the TIAA General Account for properties and non-property investments like mortgages and partnership interests). Of course REITs are more volatile, because they have their prices reset all day long, every day, in a highly-competetive auction market.

In the past, TIAA RE had a large slug of REITs, over 10%, but I think that isn't the case today. The fund has a maximum holding per person (which can be evaded by periodic investment plans), and can only be sold once quarterly. Like some mutual funds, redemptions can theoretically be delayed by TIAA during a period of market instability.

(I have owned TIAA RE since its inception, but mostly as buy-and-hold.)
I think the Morningstar Forum was shut down.

Dave
Was it shut down?
Or was it changed so it became exceedingly user unfriendly, and thus very infrequently used, compared with "before'?

RM
I just logged in and the site said URL no longer exits. I think some of the posters migrated to armchair investing.

Dave
Still there:

https://community.morningstar.com/s/top ... ing-forums

VERY low usage, few posts and almost no replies to any of them.

RM
Thanks, found it.

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by crefwatch »

ResearchMed wrote: Thu Jan 27, 2022 9:11 am Still there:

https://community.morningstar.com/s/top ... ing-forums

VERY low usage, few posts and almost no replies to any of them.

RM
When the point of comparison is the Bogleheads forum, this statement is 100% accurate. But it is also fair to say that the average quality of both the questions and the answers regarding TIAA is higher on the Morningstar forum. It is also true that people who regularly post on both boards are a significant factor in the quality of TIAA discussions here.

Although I feel there are too many off-topic threads at Morningstar, they are a much lower proportion (globally) than the non-investing topics that appear on Bogleheads.

I am not arguing that a smaller universe of data produces superior results. I'm just making an observation, like the post to which I am responding.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by ResearchMed »

crefwatch wrote: Thu Jan 27, 2022 9:55 am
ResearchMed wrote: Thu Jan 27, 2022 9:11 am Still there:

https://community.morningstar.com/s/top ... ing-forums

VERY low usage, few posts and almost no replies to any of them.

RM
When the point of comparison is the Bogleheads forum, this statement is 100% accurate. But it is also fair to say that the average quality of both the questions and the answers regarding TIAA is higher on the Morningstar forum. It is also true that people who regularly post on both boards are a significant factor in the quality of TIAA discussions here.

Although I feel there are too many off-topic threads at Morningstar, they are a much lower proportion (globally) than the non-investing topics that appear on Bogleheads.

I am not arguing that a smaller universe of data produces superior results. I'm just making an observation, like the post to which I am responding.
I definitely agree.
Just to clarify, my comment about 'low usage' was meant to apply to the Morningstar Forum in general, not just any TIAA/TREA topics.

Did M* change the user-friendliness to try to dissuade people from participating?

I think there was a bit more OT discussion that could derail topics, but it didn't get too objectionable. Much more good than not. But now, not much of anything. And to see no replies at all on the first page (at least as it appeared when I just looked and also about 1-2 weeks ago), that wasn't the case in the past.

Too bad, and yes, especially wrt TREA, Trad Ann, or any TIAA topics.
Too bad yogibearbull doesn't post on BH (unless they are going incognito).

RM
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by steve r »

tibbitts wrote: Sun Jan 09, 2022 2:50 pm
talzara wrote: Sun Jan 09, 2022 2:37 pm
tibbitts wrote: Sun Jan 09, 2022 2:07 pm Did someone in another thread (maybe you?) calculate the effective (vs. a REIT fund) expense ratio of the TIAA fund at something in the .5% range? In any case it would still be enough to be a bridge just too far for some Bogleheads. I recall that the TIAA fund reported expenses were lower some some years ago (in the upper .5% range I think), maybe before some of the financial-crisis-related changes.
Yes, that was me, and I was replying to you.

TREA's effective expense ratio is 0.32% to 0.58%, depending on how much you think the liquidity guarantee is worth:
talzara wrote: Sun Apr 04, 2021 12:48 pm If you believe that the liquidity guarantee is worthless because Vanguard gets liquidity for free, then TREA's expense ratio is 0.58%. This is much higher than the Vanguard Real Estate Index Fund's expense ratio of 0.12%.

If you believe that the liquidity guarantee is worth 0.28% because it guarantees NAV, then TREA's expense ratio is 0.32%. This is still higher than Vanguard Real Estate's 0.12%.

viewtopic.php?p=5923792#p5923792
Thanks, again. So far more expensive than what many Bogleheads would ever accept, but somewhat low in comparison to a typical active REIT fund.
I would add, that it is comparable to other funds offered by TIAA for (my school's) 403b. It is not so much that the ER/fees are high, as it is all ER/fees are high for my options. (For example: my school allows me to buy some Vanguard index funds, but the has TIAA add about 30-35 bps to cover costs. :? )

I am a fan of the direct ownership model and a long time holder. Property values owned by REITs do not jump up and down as much a Mr. (equity) Market suggests. I suspect TIAA RE provides greater diversification benefits than REITs which I have seen tank when the market tanks too many times.

The correlation between REITs and US TSM (1972 to 2021) has been .6. Between VT and REITs .5. Worse, the correlations have increased in recent decades.
https://bit.ly/3f41sP1.
Last edited by steve r on Thu Jan 27, 2022 10:40 am, edited 1 time in total.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by tibbitts »

tj wrote: Thu Jan 27, 2022 8:49 am
tibbitts wrote: Wed Jan 26, 2022 10:57 am
tj wrote: Wed Jan 26, 2022 9:35 am The problem with TIAA Traditional is that the yield on IRA is drastically lower than the employer plans. As a federal employee, I can open an IRA at TIAA, the Real Estate Account is the same in IRA's vs employer plans, but the TIAA Traditional is drastically worse.
As a federal employee your employer plan and benefits in general are by no means typical of employer plans, so not everyone will have a guaranteed employer option currently paying more than the current TIAA IRA 1.5% rate as you do, much less more than the 3% (minimum) rate on some TIAA employer plans. As a federal employee, once you've maxed the contributions to your TSP employer plan, maybe you have IRA investment options available that most people don't. I was never a federal employee so don't have any knowledge of plan provisions, but you can only compare the TIAA IRA rate to the rate available to you on IRA contributions, not for your employer contributions.
It has absolutely nothing to do with my employer contributions which of course go in the TSP.

https://www.tiaa.org/public/pdf/eligibi ... ternal.pdf

Being a federal employee is simply what would allow me to contribute to TIAA Traditional or TIAA Real Estate Account annuities, if not for that, pretty sure i'd be locked out altogether.
It does have to do with you being a federal employee, because you have at least one option in TSP that currently exceeds the 1.5% TIAA IRA Traditional rate (although that might not have always been the case.) Many employees would choose to contribute to an employer plan up to the max match due to limited or poor options, and then seek other options in an IRA. Although it's taken for granted here, outside of Bogleheads, not everyone will max out contributions to both employer plans and IRAs. So when you say "TIAA (Traditional) is drastically worse", you're saying that from the context of what's available to a federal employee.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by crefwatch »

steve r wrote: Thu Jan 27, 2022 10:15 am
I would add, that it is comparable to other funds offered by TIAA for (my school's) 403b. It is not so much that the ER/fees are high, as it is all ER/fees are high for my options. (For example: my school allows me to buy some Vanguard index funds, but the has TIAA add about 30-35 bps to cover costs. :? )
Hey steve, I"m not arguing with you, and not defending TIAA. But are you sure about your actual effective ER? [Edit: I have boldfaced "effective" because it is NOT a defined-term, and is never presented to you as mandated, regulated SEC fund-reporting. You need to find the narrative letter from the employer with a chart of these effective ER fees.] Many of the new unbundled plans have Plan Servicing Credits/Fees. While only my one of five plans has this administrative fee model, a .05% ER Vanguard fund is only grossed up to .09%. The way the machine works is that any fund under .09% is grossed up to that number. And Revenue Sharing can lower funds just over .09% as much as 15 basis points, but only down to .09%, I think.

Even otherwise poor ER CREF VA accounts can experience this benefit in such a plan.

Your Investment Committee's mileage may differ.
Last edited by crefwatch on Fri Jan 28, 2022 12:00 pm, edited 1 time in total.
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Re: Vanguard REIT vs TIAA Direct Real Estate

Post by steve r »

crefwatch wrote: Thu Jan 27, 2022 10:54 am
steve r wrote: Thu Jan 27, 2022 10:15 am
I would add, that it is comparable to other funds offered by TIAA for (my school's) 403b. It is not so much that the ER/fees are high, as it is all ER/fees are high for my options. (For example: my school allows me to buy some Vanguard index funds, but the has TIAA add about 30-35 bps to cover costs. :? )
Hey steve, I"m not arguing with you, and not defending TIAA. But are you sure about your actual effective ER? Many of the new unbundled plans have Plan Servicing Credits/Fees. While only my one of five plans has this administrative fee model, a .05% ER Vanguard fund is only grossed up to .09%. The way the machine works is that any fund under .09% is grossed up to that number. And Revenue Sharing can lower funds just over .09% as much as 15 basis points, but only down to .09%, I think.

Even otherwise poor ER CREF VA accounts can experience this benefit in such a plan.

Your Investment Committee's mileage may differ.
Yes. I am sure. To be honest, I do not recall what the fees are "called". They are MUCH larger for non-TIAA funds. In fact, I recently double checked to see if things changed. The rep couldn't explain things to me. So I checked with a colleague who owned Vanguard, and sure enough (at the rates announced in the next paragraph).

Worse, I had money in a Fidelity 403b fund, I kept it there for a long time, but since my Vanguard options were good enough, I decided to simplify things. Transferred. About 3 months later I got notified that these fees were coming (and they came). It felt like a bait and switch. I am unable to transfer back.

My employer pays next to nothing of the administrative fees or whatever they are called (paid behind the scene by other employers -- or so I am told), BUT matches 8 percent. So, good and bad. :beer
"Owning the stock market over the long term is a winner's game. Attempting to beat the market is a loser's game. ..Don't look for the needle in the haystack. Just buy the haystack." Jack Bogle
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