The SpaceX initial public offering has been the talk of the retirement investing world this past month, and I can’t recall another single company stirring up opinions quite like this. Some folks want in, others want no part of it, and the reasons range from financial to political.
Where SpaceX Shows Up in the MSU 403(b) Lineup
Here’s a breakdown of what to expect in the mutual funds that invest in large company stocks available within the Michigan State University retirement plan:
- The Vanguard Target Retirement Funds will likely own the stock early, since a portion of their holdings is based on the CRSP Total US Market Index, and that index modified its rules so SpaceX would be included right away. The amount is still very small, estimated at about 0.20% of the index. Vanguard’s Target Date Funds are also complete portfolios built out of several other Vanguard funds, so the slice that tracks this index is less than the entire portfolio, and that allocation shrinks as you approach retirement. So while SpaceX is probably already present in these funds, at this point the amount is financially insignificant.
- The Vanguard Institutional Index Fund, one of the core holdings we use for clients in the MSU plan, will not likely contain SpaceX until 2027, since this fund tracks the S&P 500 and that index did not modify its rules to allow SpaceX early entry. It’s likely that by mid-2027 the company will meet the criteria for inclusion and become a small portion of that fund as well.
The Active Fund Managers
The other funds in the MSU retirement plan that invest in large US company stocks are what we refer to as active funds. Rather than track an index like the Vanguard funds listed above, they have managers choosing what to buy within their category based on their own investment philosophy. So they aren’t as predictable as index funds, but we can make some assumptions about their likely exposure based on what we know about them:
- The Dodge and Cox Stock Fund, another fund we use in our MSU model portfolios, is not likely to own SpaceX, as they focus on value stocks, the opposite philosophy of purchasing a high-flying technology company right after it goes public. The odds are low that SpaceX will show up in this fund anytime soon.
- T. Rowe Price Large Cap Growth Fund and the Primecap Odyssey Fund, on the other hand, focus on the sort of company that SpaceX exemplifies, a story about future growth and development rather than current value. Within the MSU plan, these are the funds most likely to own SpaceX in a meaningful amount. If you want to own SpaceX, these funds are your best option within the plan without using the brokerage options available through Fidelity and TIAA.
- CREF Total Global Equity is not likely to own a meaningful amount of SpaceX, as the managers tend to stick close to their benchmark indices rather than overweight particular companies. The stock will likely appear in the fund at some point, but more in line with what I described for the Vanguard funds.
- The other active stock funds in the MSU plan aren’t likely to own SpaceX because of their international focus or because they invest in smaller companies.
Note that for actively managed funds, the managers only report their holdings quarterly, and often it’s difficult to find information beyond their top holdings, so knowing what these funds do and don’t contain day to day is impossible.
Thinking Ahead to AI IPOs
This framework should help you understand whether you’ll own SpaceX stock in your retirement plan, and the same basic approach should work for upcoming AI-related public offerings, since they’re likely to be similar situations.
Our Approach
We take the same approach with SpaceX that we take with every individual company: no predictions, no chasing headlines. We build portfolios around long-term economic outcomes using broad, index-based funds, and when a stock earns its way into the index we follow, it comes along for the ride. That’s the same thinking behind the model portfolios we build for MSU clients using funds like Dodge and Cox and the Vanguard index funds above.
If you’d rather have more say over which of these stocks lands in your retirement portfolio, the brokerage options through Fidelity and TIAA give MSU employees that flexibility. And if you have any other questions about the Michigan State University retirement plan or retirement in general, please reach out to us.
