Timing the TIAA Real Estate Account

  • In order to maximize returns one has to know when to enter and exit the TIAA Real Estate Account.
  • Our analysis shows that a firm sell signal arises when its 1-year rolling return moves below 0%.
  • A subsequent buy signal would be given when its 1-year rolling return moves from below to above 0%.

This $20-billion account provides direct ownership interests in commercial real estate, offering diversification beyond traditional equity and fixed-income investments with guaranteed daily liquidity. The daily value is determined by a formula resulting in very low volatility of the account’s unit value, as evidenced by the smooth performance graph of the TIAA Real Estate Account (QREARX), hereinafter further referred to as TIAAreal.

In this article we analyzed the performance of TIAAreal which recorded a minimum 1-year Rolling Return of -35% as shown by the red graph in the chart below. This chart is similar to our monthly update posting at iMarketSignals.com and is marked as Fig-1.

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The blue graph depicts the performance of TIAAreal normalized to 100 at the beginning of the year 2000. The yellow graph shows the performance with timing and assumes that funds were invested in the CREF Bond Market Account (QCBMRX) during the time when not invested in TIAAreal. This would have resulted for an initial $100 investment to grow to $421, whereas a static investment in TIAAreal would only be worth $240 at the end.

Annual returns

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Figure-2 shows the calendar year returns. TIAAreal-timed always would have had positive returns, even in 2008 when there were huge losses for the broader market.

Rolling 1-year returns

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Figure-3 shows the rolling year-on-year return. Only for a very short period at the end of 2008 would the return have been slightly negative. At the end of 2014 the rolling return was over 12% comparing favorably with that of SPY.

Distribution of monthly returns

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Figure-4 shows the monthly returns. There were only 16 months during the 15 year period when the monthly return was negative.

Terminal Values

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To simulate savings over time, terminal values were calculated for annual hypothetical investments of $1. Starting with a dollar during each of the 15 years from 2000 to 2014, one would have invested a total of $15 cumulatively by the end. Summing the terminal values, this strategy would have netted this dollar-per-year investor $32 at the end. Following the same strategy but investing in SPY, one would have only $27.

Risk

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The high Sharpe and Sortino ratios for TIAAreal-timed indicate that this should be a low-risk investment.

Following TIAAreal-timed

Monthly updates of performance are posted on our website.


 

Disclosure: The author currently holds TIAA Real Estate.

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Posted in blogs, featured, Vanguard/TIAA CREF Blogs, yale
8 comments on “Timing the TIAA Real Estate Account
  1. joelsproul says:

    Is there any track record before 1999? My concern is that there’s only 1 round trip signal here.

  2. superosky says:

    would you recommend a buy on the VGSIX since it appears to be producing a better result than then TIAA timed?

  3. geovrba says:

    Historic performance has been better for VGSIX but much more volatile than that of the TIAA Real Estate Account. TIAAreal-timed appears to be less risky than VGSIX.

  4. gasman says:

    George,
    This model shows good promise but some of us do not have access to TIAA.
    Would FRIFX be a good candidate as a substitute to time in a similar way of use TIAA signals?

  5. numejak says:

    where in the wold can I buy QREARX? I have IB and Robin Hood and neither offer it.

  6. geovrba says:

    You need an account at TIAA-CREF if you want to invest in the TIAA Real Estate Account (QREARX). It is not available from any broker.

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