History Is Being Made

The last time an additional investment choice was added to the line-up for Tier I/II Qualified Pension Plan (QPP) and tax-deferred annuity (TDA) for all tiers, was 1983. The current investments have given members a good selection of choices between earning current interest rates, earning a fixed guaranteed-rate of return and participating in the investment results of investment in the broad stock market. All three programs have met their objectives.

Beginning on July 1, three new investment choices will be added to the available choices. So, in the future, you will have six choices. The investment program will have a new name, Passport Funds, and in addition to the new investment options it will be easier to move your money from fund to fund as your personal investment objectives change.

Passport Funds

The three current funds will still exist although with different names. Here are the new names and a reminder of each fund’s objective:

Fixed Return Fund (Fixed Annuity Program): Offers a guaranteed rate of return set by the New York State Legislature. The current rate is 8.25 percent and is guaranteed through June 30, 2009.

Diversified Equity Fund (Variable Annuity A Program): Invests primarily in U.S. stocks, with a portion of the fund invested in stocks of non-U.S. companies in the developed markets of the world. Also, a portion of the fund that is invested in a defensive manner in order to reduce volatility. The objective is to achieve a rate of return comparable to the return of the broad stock market.

Stable Value Fund (Variable Annuity B Program): Invests in Guaranteed Investment Contracts (GICs), short-term bonds (wrapped for principal protection) and cash. The purpose is to preserve principal and to provide a steady rate of return.

The three new funds were decided upon after long discussions with members, investment advisors and retirement savings experts. Each of these new funds has a distinct goal and collectively they give members a variety of opportunities for diversification:

International Equity Fund: Primarily invests in non-U.S. companies traded on a variety of stock exchanges and denominated in a variety of currencies in the developed countries of the world. The objective is to provide long-term capital growth, and to achieve a rate of return comparable to the return of the non-U.S. developed market over a full market cycle. This additional investment allows a member to increase participation in the world economy above the 15 percent allocation to International stocks in the Diversified Equity Fund.

Inflation Protection Fund: Invests in assets that may include but are not limited to commodities, real estate securities and inflation-linked bonds. The objective is to provide a positive real rate of return that exceeds inflation over a full market cycle.

Socially Responsive Equity Fund: Invests in stocks of companies that do not receive a significant portion of their revenues from alcohol, tobacco, gambling, nuclear power, weapons, have poor labor-management relations, damage the environment or creating public health problems. The objective is to achieve long-term capital growth at a rate of return comparable to that of the broad stock market while reflecting social priorities.

These brief descriptions indicate the highlights of the funds. More detailed descriptions of the investments are found in TRS publications such as “Passport Funds, Fund Profiles.” Remember, never invest in any investment whose goals and risks you do not understand.

These funds will first become available on July 1 but they are new, long-term additions to your TRS investment choices. If you do not elect to make changes in your portfolio at this time, you will be able to do so in the future. If your current choices have met their goals up to now and if they satisfy your intentions you should not rush into something just because it is new. On the other hand, if one of the new choices better meets your goals — go to it. There is, of course, no guarantee that the funds will meet their objectives and past performance is no guarantee of future returns.