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

Investment Objective. 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.

Investment Strategy. 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.


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.

 
 


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.

 
 


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.

 
 


International Equity Index (Risk level – Aggressive)


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

Investment Strategy. Each of the mutual funds in which this Investment Option invests is considered an “index fund,” meaning that it attempts to track a benchmark index.


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


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

Investment Strategy. Each of the mutual funds in which this Investment Option invests is considered an “index fund,” meaning that it attempts to track a benchmark index.


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


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

Investment Strategy. This Investment Option invests 100% of its assets in one “index fund,” meaning that the fund attempts to track a benchmark index.



Balanced Option

Investment Objective. This Investment Option seeks to provide a favorable long-term total return by investing in a balanced mix of mutual funds that invest primarily in equity securities and mutual funds that invest primarily in debt securities.

Investment Strategy. This Investment Option invests in multiple mutual funds. 84% of the Investment Option’s assets are invested in mutual funds that are considered “index funds,” meaning that they intend to track a benchmark index. The remaining 16% of the Investment Option’s assets are invested in mutual funds that are actively managed.


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

Investment Objective. This Investment Option seeks to provide a moderate long-term rate of return primarily through current income.

Investment Strategy. This investment Option invests 75% of its assets in an “index fund,” meaning that the fund attempts to track a benchmark index, and the remaining 25% of its assets in a mutual fund that is actively managed.


Principal Plus Interest Option

Investment Objective. This Investment Option seeks to preserve capital and provide a stable return.

Investment Strategy. The assets in this Investment Option are allocated to a funding agreement issued by TIAA-CREF Life, which is an affiliate of TFI, to the Michigan Department of Treasury as the policyholder on behalf of MESP. The funding agreement provides a minimum guaranteed rate of return on the amounts allocated to it by the Investment Option. The minimum effective annual interest rate will be neither less than 1% nor greater than 3% at any time. The guarantee is made by the insurance company to the policyholder, not to Account Owners. In addition to the guaranteed rate of interest to the policyholder, the funding agreement allows for the possibility that additional interest may be credited as declared periodically by TIAA-CREF Life. 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 current effective annual interest rate applicable to the funding agreement will be posted on MESP’s website.

Effective January 1, 2015, accumulations (including contributions and earnings) under the Funding Agreement for the Principal Plus Interest Option as of December 31, 2014 will be credited to MESP with an effective annual interest rate of 1.35%, and are guaranteed to earn this rate through December 31, 2015, subject to the claims-paying ability of TIAA-CREF Life Insurance Company.



Reflects current allocations for all investment options. Allocations are reviewed and adjusted periodicially.

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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