New York’s $406bn (€300bn) TIAA-CREF retirement system, which provides pensions to professors, doctors and scientists in the US, has stopped building its exposure to emerging market debt because an influx of investors has soaked up available opportunities.
The news follows a report this month from Standard & Poor’s Ratings Services that its upgrades of government issuers of debt in emerging market countries has soared to the highest level in 10 years.
TIAA-CREF’s decision marks the first time in eight years that the pension fund has stopped increasing its exposure, managing director Katherine Renfrew told a conference yesterday.
The pension fund is concerned the recent bond rally has pushed spreads in emerging market debt to record tight levels, according to a report of Renfrew’s speech by Reuters.
“There is a real concern about sovereign spreads. A lot of money is getting into the asset class now, but we have got to be patient and look for other opportunities,” Renfrew told the conference.
TIAA-CREF has about $4bn invested in emerging debt markets, according to the report. It invests about 70 percent of its emerging debt assets in corporate bonds issued mainly by investment-grade rated companies, and is in the process of re-allocating its investments within the asset class, said Renfrew.