Two years ago it was commonplace for an investor to receive a financial statement touting the profits of a recent investment. Many of these recipients were Princeton professors and employees, like history professor Anthony Grafton and English professor John Fleming GS '63, who opened their mail to learn how their TIAA-CREF retirement accounts were accumulating greenbacks.
"They gave us personal representatives which made me feel very good before the [recent financial] debacle," Fleming said of TIAA-CREF's personal attention.
With the burst of the technology bubble and precipitous decline of American stock markets during the last two years, University retirement accounts such as personal portfolios have contracted.
Both professors said the mailings and calls have become far less frequent, corresponding to the stock market decline.
"I haven't heard from them recently — they're lying low," Fleming said.
The collapse of energy-giant Enron has further exacerbated financial losses in retirement accounts. The Florida state pension fund lost $328 million, one of the largest losses suffered by an Enron shareholder. The University of California system lost $115.5 million in its retirement portfolio and $144.9 million in total managed accounts, according to its website.
However, several professors have said the Enron losses are minimal compared to the loss resulting from the decline in technology stocks.
"The total market value lost was $86 billion, the total value in terms of pension funds was not a lot in Enron," economics professor Uwe Reinhardt said. "It was a big dollar loss but not a big percent loss."
The UC system lost less than 0.3-percent of its managed accounts because of Enron. Despite the Enron collapse, the UC system retirement accounts grew by more than $1.9 billion during the autumn. The California system last month was named the lead plaintiff in a class-action lawsuit against 29 senior executives at Enron and the company's auditor, Arthur Andersen, LLP.
Unlike the Florida and UC system, Princeton's retirement system is managed by TIAA-CREF, a financial services company which manages more than $280 billion for education and research communities.
TIAA-CREF holds stocks according to industry benchmark standards, such as the Standard & Poor's 500. When a benchmark index holds a company, TIAA-CREF's equity funds and accounts hold the stock in roughly the same proportion or underweights the stock.
"The TIAA general pension account does not have any direct exposure to Enron," TIAA-CREF officials said. "Holdings in Enron subsidiaries total less than $200 million, 95 percent of which are with regulated entities that are highly credit worthy, and rated investment grade."
In addition, TIAA-CREF is reducing its exposure to corporate bonds and does not expect losses from its current holdings, officials said.
"[There is] limited exposure because a lot of the money goes into an index fund," Reinhardt said of retirement accounts.
For all three professors, however, it is not the numerical losses accrued because of Enron's collapse, but rather the institutional flaws that are worrisome.
"The structural problem scares me a little," Grafton, 51, said. "I'm preparing for the worst case — a 20-year retirement starting at 70. My family has pretty good life expectancy. That is a lot of money to save."
Grafton explained that the performance of retirement accounts affects younger faculty as well.
Tenured faculty are not compelled to retire and may elect to remain at the University to accumulate a larger nest egg. Grafton said this would inhibit younger faculty from joining departments.
Reinhardt said he views the Enron collapse as a metaphor for fundamental market issues that need to be addressed.
"The real problem from the point of view of retirement Americans is the lunacy of Wall Street," he said. "[Their] not putting a limit on the qualifications of analysts at major firms — it finally came home to roost."
Reinhardt added that Enron has attracted so much media attention because of the alleged links to government. He said other recent mismanagement stories such as AT&T and Lucent Technologies had as large or larger market impacts.
Fleming said he also views the problem as the "buccaneering attitude with regard to energy and tech stocks [that] has wreaked havoc in stock markets in general."
However, with their money locked up Grafton and Fleming said they were pleased with the diversified holdings of TIAA-CREF.
"Those of us who have money in it, all you can do is leave it in there for the long run," Fleming said.
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