Investment Options

The Michigan Education Savings Program (MESP) offers a choice of nine (9) Investment Options. These options vary in investment strategy and degree of risk. It’s important to select an option or combination of options that fit your needs and your risk tolerance.

For more information on the risks involved in investing in such Investment Options, and the type of investor for whom each Investment Option may be appropriate, read the Disclosure Booklet (PDF).

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Investment Options

Changing Your Investments
Once you invest in a particular Investment Option, you can transfer contributions and any earnings to another Investment Option once per calendar year or upon a transfer of funds to a MESP account for a different beneficiary.

Periodically Review Your Investments
It's a good idea to periodically re-evaluate your investment strategy as your goals, investment horizon, and personal situation change - for example, annually at tax time, on a yearly basis if your income changes, or upon the birth of another child.


Age-Based Allocation Options

The age-based Allocation Options seek to match the investment objective and level of risk to the investment horizon by taking into account the Beneficiary's current age and the number of years before the Beneficiary turns 18. Depending on the Beneficiary's age, contributions to these Investment Options will be placed in one of nine age bands, each of which has a different investment objective and investment strategy. As discussed in more detail below, the age bands for younger Beneficiaries seek a favorable long-term return by primarily investing in mutual funds that primarily invest in equity and real estate securities, which may have greater potential for returns than debt securities, but which also have greater risk than debt securities. As a Beneficiary nears college age, the age bands invest less in mutual funds that invest in equity and real estate securities and more in mutual funds that invest in debt securities and in other investments that seek to preserve principal.

As the Beneficiary ages, assets in your Account invested in an age-based Investment Option are moved from one age band to the next on the first "Rolling Date" following the Beneficiary's fifth, ninth, eleventh, thirteenth, fifteenth, sixteenth, seventeenth, and eighteenth birthdays. The Rolling Dates are March 20, June 20, September 20 and December 20 (or the first business day thereafter).


Conservative Age-Based Allocation Option (Risk level shifts from aggressive to conservative as the Beneficiary ages)

Each age band in the Conservative Age-Based Allocation Option will invest more heavily in conservative investments than the corresponding age band within the Moderate or Aggressive Age-Based Allocation Options.

 
 

Allocations for all investments are as of November 2012. Allocations are reviewed and adjusted periodically.


Moderate Age-Based Allocation Option (Risk level shifts from aggressive to conservative as the Beneficiary ages)

Each age band in the Moderate Age-Based Allocation Option will invest more heavily in mutual funds that invest in equity and real estate securities than the corresponding age band within the Conservative Age-Based Allocation Option, but less heavily in such mutual funds than the Aggressive Age-Based Allocation Option. Furthermore, each age band in the Moderate Age-Based Allocation Option will invest more heavily in conservative investments than the corresponding age band within the Aggressive Age-Based Allocation Option, but less heavily than the Conservative Age-Based Allocation Option.

 
 

Allocations for all investments are as of November 2012. Allocations are reviewed and adjusted periodically.


Aggressive Age-Based Allocation Option (Risk level shifts from aggressive to conservative as the Beneficiary ages)

Each age band in the Aggressive Age-Based Allocation Option will invest more heavily in mutual funds that invest in equity and real estate securities than the corresponding age band within the Conservative or Moderate Age-Based Allocation Options.

 
 

Allocations for all investments are as of November 2012. Allocations are reviewed and adjusted periodically.


International Equity Index (Risk level – Aggressive)


This Investment Option seeks to provide a favorable long-term total return, mainly through capital appreciation.

Allocations for all investments are as of November 2012. Allocations are reviewed and adjusted periodically.


Global Equity Index Option (Previously 100% Equity Option) (Risk level – Aggressive)


This Investment Option seeks to provide a favorable long-term total return, mainly through capital appreciation.

Allocations for all investments are as of November 2012. Allocations are reviewed and adjusted periodically.


U.S. Equity Index (Risk level – Aggressive)


This Investment Option seeks to provide a favorable long-term total return, mainly from capital appreciation.

Allocations for all investments are as of November 2012. Allocations are reviewed and adjusted periodically.


Balanced Option

The Balanced Fund Option invests in an equal combination of equity and bond investments offered by TIAA-CREF Funds - Institutional Class. The Balanced Option has approximately 60% of its holdings invested in equity funds and 40% of its holdings invested in bond funds.

The Balanced Option is designed to appeal to moderately conservative and moderately aggressive Account Owners who are willing to accept and can tolerate a degree of volatility in exchange for potentially higher returns over time. This option may be appropriate for use as a single Investment Option, or for use in conjunction with other Investment Option offered by the program.

Allocations for all investments are as of November 2012. Allocations are reviewed and adjusted periodically.


100% Fixed-Income Option (Risk level – Moderate)

This Investment Option seeks to provide preservation of capital along with a moderate rate of return through a diversified mix of fixed-income investments. This Investment Option may be appropriate for you if you have a medium to short investment horizon and can tolerate a moderate level of risk.

Allocations for all investments are as of November 2012. Allocations are reviewed and adjusted periodically.


Principal Plus Interest Option

This Investment Option seeks to preserve capital and provide a stable return. It may be appropriate for you if you have a short investment horizon and are looking for a conservative investment with a low level of risk. The contributions invested in this Investment Option are allocated to a Funding Agreement issued by TIAA-CREF Life to the Michigan Department of Treasury, which is the policyholder under the agreement. The Funding Agreement provides for a return of principal plus a guaranteed rate of interest and allows for the possibility that additional interest may be credited as declared periodically by TIAA-CREF Life. The interest rate guarantee is made to the Michigan Department of Treasury only, and not to Account Owners or Beneficiaries. The rate of any additional interest is declared in advance for a period of up to 12 months and is not guaranteed for any future periods. The term of the Funding Agreement is intended to coincide with the term of the Management Agreement. For more information on the Funding Agreement, please see "Summary of the TIAA-CREF Life Insurance Company Funding Agreement" in Appendix I of the MESP Disclosure Book.

Effective January 1, 2014, accumulations (including contributions and earnings) under the Funding Agreement for the Principal Plus Interest Option as of December 31, 2013 will be credited to MESP with an effective annual interest rate of 1.20%, and are guaranteed to earn this rate through December 31, 2014, subject to the claims-paying ability of TIAA-CREF Life Insurance Company.



Account values are not guaranteed and will fluctuate with market conditions. For a complete discussion of risks associate with each Investment Option, please refer to the Disclosure Booklet.

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