Former Fed vice chair expects Dec. rate hike
If you're an academic in the Philadelphia region and invest with TIAA-CREF, meet Roger Ferguson, former vice chairman of the Federal Reserve, who now runs the money-management firm overseeing $835 billion in retirement assets as of Sept. 30.
If you're an academic in the Philadelphia region and invest with TIAA-CREF, meet Roger Ferguson, former vice chairman of the Federal Reserve, who now runs the money-management firm overseeing $835 billion in retirement assets as of Sept. 30.
TIAA-CREF's 72,000 clients run the gamut from professors and researchers to graduate students. Founded by Andrew Carnegie in 1918, it was set up to support college teachers with annuities and life insurance, and has since expanded to management of retirement assets.
As former vice chair of the central bank, Ferguson understands the thinking of Chair Janet Yellen. They worked together when she was president of the Federal Reserve Bank of San Francisco.
"It's a little more likely than not" that the Fed will raise interest rates in December, Ferguson said in a wide-ranging interview this week.
Yellen testified Wednesday on Capitol Hill that a December rate hike "is in play," he said. "There's probably a 60 percent possibility of Fed liftoff in December."
Ferguson recalls Yellen as "smart and analytical."
Now that he works for retirees, however - TIAA-CREF's educational clients include the University of Pennsylvania, Drexel, Temple, the University of Delaware, Wilmington University, and the New Jersey Alternative Benefit Program - he has a consumer's view on inflation.
"Over long periods, inflation erodes the savings of retirees. Health-care inflation is outrunning measured inflation" in the consumer price index, he said.
"Individuals are experiencing something quite different than the norm" of headline inflation, Ferguson added. The official CPI dropped 0.2 percent in September after falling 0.1 percent in August, according to the Labor Department.
Congress' surprise decision last month to slash some Social Security benefits - killing off a strategy known as "file and suspend" - is a "wake-up call that . . . reform is on the table," he said. "It's a sign" that broader changes or cuts to Social Security are up for discussion.
On the economy, Ferguson said he sees continued slow but steady U.S. GDP growth of about 2 percent to 2.5 percent annually.
"The macro story, is labor markets are stronger, the housing market has recovered," he said, "and yet there's much more market volatility, what with China's devaluation and geopolitical uncertainties. Still, the earnings picture so far has surprised to the upside."
Ferguson joined TIAA-CREF in 2010 as president and CEO. He adopted the philosophy of Yale University endowment manager David Swensen, who sat on TIAA-CREF's board and urged diversification into alternative investments.
This year, TIAA-CREF completed buying TIAA Henderson Real Estate, the world's second-largest commercial-property owner.
In 2012, it acquired a majority of GreenWood, which develops and manages tree farms, and in 2010 bought West Chester Agriculture Asset Management, with more than $3 billion of farmland.
Local real estate and securities investments include Overlook at King of Prussia, the Pepper Building, and Bishop's View in Philadelphia.
215-854-2808@erinarvedlund