TIAA-CREF Asset Management

Anupam Damani, CFA

Portfolio Manager, Emerging Markets Debt

Joseph Higgins, CFA

Portfolio Manager, Multi-Sector Fixed Income

Stephen MacDonald, CFA

Managing Director, Client Portfolio Management

November 13, 2014

Fixed Income: Risk and opportunity

in the post-QE environment

2

Overview of fixed-income themes

The post-QE environment and transition

to rising rates

Structural changes that affect how we

think about fixed income

Relative-value investment opportunities

and portfolio positioning

3

Global bond yields, dollar directionality

and U.S. rates

Sovereign Bonds (actual yields as of

11/11/2014)

10 Year 30 Year

United States 2.36% 3.09%

Germany 0.83% 1.76%

Japan 0.49% 1.51%

United Kingdom 2.22% 2.93%

France 1.18% 2.28%

GDP growth forecasts

1/1/2014 11/11/2014

2014 2015 2014 2015

United

States 2.60 3.00 2.20 3.00

EU 1.41 1.71 1.36 1.60

Japan 1.60 1.20 1.00 1.10

EM 5.07 5.35 4.43 4.95

Source: Bloomberg

The U.S. Dollar Index (DXY) measures the value of the dollar relative to a basket of foreign currencies.

QE is past tense.

Rate increases – modest

Source: Bloomberg Consensus forecasts; for EM, IMF World Economic Outlook Databases Source: Bloomberg

0

20

40

60

80

100

120

140

160

180

12/31/80 12/31/85 12/31/90 12/31/95 12/31/00 12/31/05 12/31/10

U.S. Dollar Index (DXY)

11/11/14

4

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

4

4.2

1/31/11 6/30/11 11/30/11 4/30/12 9/28/12 2/28/13 7/31/13 12/31/13 5/30/14 10/31/14

US 5 x 5 Forward Breakeven UK 5 x 5 Forward Breakeven

EU 5 x 5 Inflation Swap Forward Japan 5 x 5 Inflation Swap Forward

Rates represent the expected inflation over a five-year period, starting five years from now.

Source: Bloomberg

Global long-term inflation expectations

UK

US

EU

Japan

Forward rates indicate Fed is

not pressured.

5

Fed Reaction Function

1. Labor market

2. Long-term inflation expectations

3. Economic conditions in key trading partners

4. USD strength

Source: TIAA-CREF

The Fed's reaction

function is dynamic.

6

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%$0bn

$10bn

$20bn

$30bn

$40bn

$50bn

$60bn

$70bn

$80bn

$90bn

Dec-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ap

r-13

Ma

y-1

3

Jun

-13

Jul-

13

Au

g-1

3

Se

p-1

3

Oct-

13

Nov-1

3

Dec-1

3

Jan

-14

Fe

b-1

4

Ma

r-1

4

Ap

r-14

Ma

y-1

4

Jun

-14

Jul-

14

Au

g-1

4

Se

p-1

4

Pace of monthly Fed purchases US Federal Deficit as % of GDP

Source: Bloomberg

End of QE: Fed balance sheet provides a tailwind

Headwinds vs. Tailwinds

Oct-

14

7

The yield curve reflects current Treasury rates for various maturities as of the dates indicated.

Source: Bloomberg

U.S. Treasury yield curve is now lower and flatter

Change in Treasury yield curve during past 12 months

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y

11/13/13 5/13/14 11/11/14

8

2014-2015 interest-rate forecast:

Very gradual increases

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

2 YR 5 YR 10 YR 30 YR

12/31/2014 12/31/2015

Treasury yield curve expectations 12/31/2014 vs. 12/31/2015

Source: TIAA-CREF forecasts

Treasury yield forecasts

Date 2 YR 5 YR 10 YR 30 YR

12/31/2014 0.60% 1.70% 2.50% 3.25%

12/31/2015 0.90% 2.00% 2.75% 3.40%

Greater downside

than upside risk to

our 2015 rate

forecast

9

Secular and structural changes

we're focused on

10

China, Europe and global leadership in

long-term transition

China: Slower growth Europe: Gradual economic reform

China shifting towards sustainable path of

slower GDP growth

Implication: Highly disinflationary

Europe progressing towards a stronger

foundation

Implication: Modestly disinflationary

Global leadership vacuum

U.S. leadership on decline since 2008

Implication: Higher market volatility

Role of central banks remains front and

center

11

Demographics and regulation: Long-term tailwinds

for fixed income

Aging population increases

demand for fixed income

Changing regulatory requirements

SIFI (systemically important

financial institutions)

Regulation of institutions whose failure could trigger a

financial crisis

Basel III Increases capital requirements and capital surcharges

for major banks

Dodd-Frank / Volcker Rule Bans proprietary trading by commercial banks

SSM (Single Supervisory

Mechanism)

Creates a unified regulatory framework for banks in

European Union

50

100

150

200

250

300

50

100

150

200

250

300

1950

1965

1980

1995

2010

2025

2040

2055

2070

2085

2100

Forecast FRA

DEU JPN

GBR USA

Working-age Population, 1950-2050 (Index, 1950=100)

Source: United Nations

Increased

regulation can

hamper credit

growth and

increase volatility

12

Source: IMF

Declining consumption and government spending

Drop in household spending

since 2007 has been significant

0

0.5

1

1.5

2

2.5

3

3.5

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010 2011 2012 2013

Vo

lum

e Y

oY

% C

ha

ng

e

Yo

Y %

Cha

ng

e

Govt Spend Volume Avg YoY% Chg Govt Spend Avg YoY % Chg

Government spending providing

less fiscal stimulus

Government spending (global composite)

-2

-1

0

1

2

3

4

5

0

1

2

3

4

5

6

7

8

9

10

2005 2006 2007 2008 2009 2010 2011 2012 2013

Vo

lum

e Y

oY

% C

ha

ng

e

Yo

Y %

Cha

ng

e

Avg Volume YoY % Chg Consumer Spend Avg YoY % Chg

Household consumption (global composite)

13

Relative value investment

opportunities and portfolio

positioning

14

Relative value investment opportunities

and portfolio positioning

Trends

Short rates rise, slowly

Increasing levels of volatility (modest)

Only modest USD strength

Central bank accommodation continues globally

Subdued but steady U.S. recovery

Sectors most primed

to benefit

High quality, high yield (BB)

Short structured assets (domestic focus)

High grade corporates (spreads inverse to rates)

Fast-growing / low-correlated frontier markets, reformers, commodity

importers

Sectors hurt

Deep high yield (sensitive to marginal change in liquidity directionality)

Euro peripherals (much priced in except Greece)

Munis susceptible to rates, benefited from low supply

EM with poor policy frameworks / low credibility, commodity exporters

Portfolio positioning

General overweight to moderate credit quality, alpha focus

Modest duration underweight (inexpensive currently)

Underweight higher-quality multi-agency and government-related

Modest underweight to 2-7-year part of the curve

Reduce riskiest assets as overpriced

Please note the forecasts above concern asset classes only, and do not reflect the experience of any product or service offered by TIAA-CREF. These

forecasts are for informational purposes only and should not be considered investment advice or constitute a recommendation to purchase or sell

securities. Market forecasts are subject to uncertainty and may change based on varying market conditions, political and economic developments.

Past performance is not an indicator of future results.

15

Conclusions

A Fed rate increase is likely in second half of 2015.

The Fed has more flexibility to delay rate increases than it did one year ago.

Increasing economic and political risk have been masked by central banks

printing money through QE.

We are not long-term pessimists. Inflationary wage growth could re-emerge in

next 2-3 years.

Active management opportunities will be created by increased volatility and

asset price fluctuation.

16

TIAA-CREF fixed-income capabilities:

Extensive experience across multiple sectors

TIAA-CREF is one of the largest managers of fixed-income assets in the U.S.1

1 Pensions & Investments, May 26, 2014. Rankings based on institutional tax-exempt assets under management as of December 31, 2013 reported by each

responding asset manager.

The Lipper Award is given to the group with the lowest average decile ranking of three years’ Consistent Return for eligible funds over the three-year period ended

11/30/12 and 11/30/13, respectively. TIAA-CREF was ranked against 36 fund companies in 2012 and 48 fund companies in 2013 with at least five equity, five bond, or

three mixed-asset portfolios.

TIAA-CREF Asset Management provides investment advice and portfolio management services to the TIAA-CREF group of companies through the following entities:

Teachers Advisors, Inc., TIAA-CREF Investment Management, LLC, and Teachers Insurance and Annuity Association® (TIAA®). Teachers Advisors, Inc., is a

registered investment advisor and wholly owned subsidiary of Teachers Insurance and Annuity Association (TIAA).

1918

1995

Dedicated

HY team

formed First investment in

structured securities

First fixed-income

investment

1985

Dedicated EMD team

formed

Launch of core plus

strategy

Investment in first TIPS

issue

TIAA begins investing in

leveraged buyouts

1969

First mortgage

investment

1934 1997 1990

Launch of Social

Choice Account

1990’s/

2000’s

Leveraged fixed-income

capabilities to launch

mutual funds and

commingled products

1977

First emerging

markets transaction

Expansion of credit and

structured capabilities

into senior loans, foreign

currency, ILS/CAT

bonds, CLOs, esoteric

ABS

Launched total return

subsidiary for General

Account targeting

uncorrelated alpha

Total Fixed-Income AUM: $252.8 billion (as of 9/30/2014)

U.S./Global

Sovereign and

Emerging

Markets Debt2

Credit

Investments3

Structured

Finance

Investments4

Other5

$89.8 billion $120.5 billion $38.9 billion $3.6 billion

2 Includes government agency debt and emerging markets local currency and corporate debt 3 Includes global investment grade, high yield, tax-exempt/muni, and money market 4 Includes MBS, CMBS, and ABS 5 Includes convertible debt, cash, and preferred securities

17

Investment teams organized across three primary asset class verticals

16 portfolio managers averaging 25 years of experience

34 senior research analysts averaging 15 years of experience, 16 junior analysts

10 traders averaging 15 years of experience

U.S./Global Sovereigns

and Emerging Markets

Credit Investments Structured Finance

Investments

Specialized teams cover

EM sovereigns/quasi

sovereigns, corporates,

local currency markets

Team organized by

industry

segments/geography to

exploit subject matter

expertise

Dedicated coverage of

Agency MBS, Non-Agency

MBS, CMBS, ABS,

including consumer,

esoteric, insurance-linked,

and CLOs

Leverage a global

perspective developed

through detailed analysis

of sovereign issuers and

global macroeconomic

trends

Seek opportunities

resulting from

segmentation across

various local markets

Analysts assign

independent credit ratings

Private placement

experience and industry

expertise reinforces

proprietary approach

Structured securities

can offer:

Low correlation with

corporates

Stable/defensive cash

flows through the

business cycle

In cases, may benefit from

focus on legacy

assets/idiosyncratic risk

Asset class coverage

18

Two options for asking questions:

Send questions from webinar console

To ask questions by phone,

signal the operator

Q&A

19

Important information

This material is prepared by TIAA-CREF Asset Management and represents the views of Anupam Damani

and Joseph Higgins as of November 2014. These views may change in response to changing economic and

market conditions. The material is for informational purposes only and should not be regarded as a

recommendation or an offer to buy or sell any product or service to which this information may relate. Certain

products and services may not be available to all entities or persons.

Please note that investments in fixed-income securities are not guaranteed and are subject to interest rate,

inflation, and credit risks. Some fixed-income sectors may be subject to liquidity risk. High-yield investments

are subject to higher credit risk, and investments in foreign securities are subject to special risks, including

currency fluctuation and political and economic instability. Investments in asset-backed securities may be

subject to prepayment or extension risks.

You should consider the investment objectives, risks, charges and expenses carefully before

investing. Please call 877-518-9161or log on to tiaa-cref.org for product and fund prospectuses that

contain this and other information. Please read the prospectuses carefully before investing.

TIAA-CREF products may be subject to market and other risk factors. See the applicable product literature, or

visit tiaa-cref.org for details.

TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen

Securities, LLC, Members FINRA and SIPC, distribute securities products.

© 2014 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund,

(TIAA-CREF), 730 Third Ave., New York, NY 10017

C20540