News From GovExec on TSP

**swsop** · 01-18-2006, 03:20 AM

DAILY BRIEFING January 17, 2006

Consultants advise TSP not to change investment mix

By Karen Rutzick

An outside consulting firm on Tuesday advised Thrift Savings Plan administrators to stay the course with all investments.

The TSP, which is a 401(k)-style retirement savings plan for federal employees with assets of almost $175 billion, hired Chicago-based consulting firm Ennis Knupp & Associates to perform the first-ever external review of the plan's investment practices.

The consultants presented the first of what will be four recommendations to the TSP Board at a monthly meeting Tuesday. The initial review focused on the indexes that the TSP tracks for its common stocks (C), small- and mid-size companies (S), fixed income securities (F) and international stocks (I) funds.

The TSP is managed passively, meaning its holdings simply mirror indexes as opposed to using mutual fund managers to attempt to beat the market. For each of the four funds reviewed, the consultants told the board its current indexes remain the best choice.

The TSP board subsequently passed a resolution to retain the indexes.

The C Fund, which follows the S&P 500 Index of the top 500 stocks, and the S Fund, which tracks the Dow Jones Wilshire 4500 Index of the next 4,500 stocks, cover the universe of domestic stocks for TSP participants, consultants said.

Ennis Knupp advisers Russell Ivinjack and Neeraj Baxi told the board this combination is optimal for investors because the indexes are widely-followed and provide access to all U.S. markets.

The consultants also said switching to the next-best option, the Russell 1000 and Russell 2000 for the C and S funds respectively, would cost about $225 million.

For the F Fund, Ennis Knupp recommended sticking with the Lehman Brothers Aggregate Bond Index. The consultants noted that it is the most widely accepted index and provided the most diversification. Switching to another index would cost about $15 million, they said.

The I Fund was perhaps the toughest decision for the board and its consultants. The current index used -- the Morgan Stanley Capital International Europe, Australasia, Far East Index -- does not include Canada or emerging markets like Latin America.

"In the theoretical world, the all-inclusive fund is better because it is more diversified," TSP Executive Director Gary Amelio said.

But a number of factors stand in the way of switching to an index that includes stocks from these countries. The current index is valued daily, as are all of the other TSP funds, allowing participants to change the makeup of their holdings on a daily basis. But indexes which include emerging markets and Canada are valued monthly. Switching to monthly valuation of the I fund would require a change in policy and could create confusion and inconvenience for investors.

Also, the current index is the largest, and the board favors larger indexes so that nonfederal investors can carry the weight if TSP participants move their billions of dollars around dramatically.

Once indexes with emerging markets and Canada become daily-valued and grow larger, the board will reconsider the I Fund's index, TSP Board Chairman Andrew Saul said. The growing economies of China, India and other countries eventually will be too valuable of an investment opportunity for TSP participants to miss out, he said.

"We're going to have to look at this thing," Saul said. "I think we'd be remiss not to."

Future presentations from Ennis Knupp will cover potential changes in asset management, which is currently performed by Barclays Global Investors.

The consultants also will review the possibility of adding funds such as a real estate investment trust, which is an option some lawmakers are advocating. Amelio said key staffers on the House Government Reform Committee called a meeting Friday to discuss progress on the REIT option.

The TSP also announced at Tuesday's meeting that it is retaining the Metropolitan Life Insurance Co. to provide annuities for TSP participants. TSP participants have the option, upon retirement, of converting their savings into a stable annuity. About 11,000 retirees now have such annuities, officials said.

swsop

**swsop** · 02-23-2006, 01:49 AM

International stocks gain in popularity among TSP investors

By Karen Rutzick

Thrift Savings Plan participants are moving their money into international stocks as that option outperforms others, TSP statistics show.

The TSP, federal employees' version of a 401(k) retirement savings plan, offers five basic funds. For the 12 months through January 2006, the international (I) fund performed best, earning a 22.91 percent return.

Participants took notice. In that same time period, employees in the older Civil Service Retirement System went from having 4 percent of all TSP investments in the I Fund to placing 6 percent there.

Over the same time period, employees in the newer Federal Employees Retirement System moved from allocating 5 percent of investments to the I Fund to 8 percent.

The I Fund percentages increased even as a new sixth option, the lifecycle (L) funds, drew out 5 percent of investments for both CSRS and FERS employees. The L funds blend the stand-alone funds based on expected retirement dates, with the mix automatically becoming more conservative as participants near that date.

The movement is plainly illustrated by interfund transfers, which are shifts of money already in the TSP between funds. In January, participants added $753 million to the I Fund through interfund transfers. The I Fund was the only stand-alone fund to increase. By contrast, participants removed $1.2 billion from the C Fund, which invests in the stocks of the 500 largest domestic companies and had a 12-month growth of 10.4 percent.

Interfund transfers are representative of TSP participants who actively manage their investments. But TSP officials said participants who jump on market trends may not fare better in the end than employees who ride out the market.

"I'm sorry to see the herd following the I Fund," TSP Board member Alejandro Sanchez said at a monthly board meeting Tuesday.

Gary Amelio, executive director of the TSP, said "it's a sliding scale" for investors who aggressively manage their accounts, on how they perform compared with the L funds, which at times will do better than the market and at times will do worse.

TSP Chief Investment Officer Tracey Ray noted a $1.3 million trading cost for the I Fund in the month of January. That number was significantly higher than the next highest fund in trading costs, which was the S Fund at about $200,000.

Ray said the costs came because participants moving into the I Fund are "buying into an up-market, which is going to make it more expensive."

**grandma** · 02-23-2006, 08:44 AM

"I'm sorry to see the herd following the I Fund," TSP Board member Alejandro Sanchez said at a monthly board meeting Tuesday.
So now WE are the herd !!! Where does he want us to put our money??

TSP Chief Investment Officer Tracey Ray noted a $1.3 million trading cost for the I Fund in the month of January. That number was significantly higher than the next highest fund in trading costs, which was the S Fund at about $200,000.
Ray said the costs came because participants moving into the I Fund are "buying into an up-market, which is going to make it more expensive."
Is he saying it cost TSP 1.3 mil for TSPers to move into the I ?? ...that it costs TSP money for us to make money? I'vew gotten lost here somewhere - it sounds like he is saying that the folks that were NOT in I are putting up the money to pay the gains for those who were......

??

**cowboy** · 02-23-2006, 02:27 PM

Mr. Sanchez thought a few more players would jump on board the L funds that they started. People will buy the up fund because it is human nature. I believe the cost may be higher but return is much higher also. As any board meeting they have to have something to talk about to justify the meeting. Maybe it is his I fund regulators that are costing the money?

**Gilligan** · 03-21-2006, 04:00 AM

March 20, 2006

TSP officials say few plan members fell for 'phishing' scam
By Jenny Mandel
jmandel@govexec.com

Thrift Savings Plan officials said Monday that they think few people were taken in by an e-mail hoax.......The scam first came to plan administrators' attention last Thursday, when calls began arriving around 2 p.m........
About 500 people called TSP Thursday about the suspicious e-mails.......

For more info:
http://govexec.com/story_page.cfm?ar...dcn=todaysnews

**swsop** · 04-18-2006, 07:44 PM

TSP board balks at Congress' push for real estate fund
By Karen Rutzick

The Thrift Savings Plan board is digging in its heels against a plan to add a real estate investment option that is gaining momentum in Congress.

The TSP, federal employees' version of a 401(k) retirement savings plan, invests participants' $180 billion in five basic funds and life-cycle options blending those funds based on anticipated retirement dates. But 163 members of Congress have signed on as co-sponsors of a bill to add a Real Estate Investment Trust fund.

The House Government Reform Subcommittee on the Federal Workforce and Agency Organization will hold a hearing April 26 on the REIT fund option and will mark up the bill immediately following the hearing.

swsop

Full story: http://www.govexec.com/story_page.cf...856&dcn=e_gvet

Return

**Gilligan** · 04-28-2006, 10:34 AM

Vote on contentious TSP real estate fund postponed

By Karen Rutzick
krutzick@govexec.com

After a heated, adversarial hearing, lawmakers delayed a vote Wednesday on a bill to add a real estate fund to the Thrift Savings Plan.

http://govexec.com/story_page.cfm?ar...dcn=todaysnews

**swsop** · 08-04-2006, 02:08 PM

TSP international fund far outpaces others in yearlong returns

With July's returns as part of the equation, the yearlong performance of the Thrift Savings Plan's international stocks fund is now head and shoulders above its other funds.

http://www.govexec.com/story_page.cf...705&dcn=e_gvet

Barbara

**swsop** · 10-04-2006, 01:47 AM

TSP funds make small gains in September

The five basic funds making up the Thrift Savings Plan made incremental gains in September.

None lost any ground, but only one gained more than 1 percent. The C Fund, composed of common stocks on the Standard & Poor's 500 Index of the largest domestic companies, earned 2.58 percent last month. That gain brings the C Fund's 12-month earnings to 10.78 percent.

The TSP is a 401(k)-style retirement savings plan for federal employees and some members of the military. At last count, it had $191 billion in its funds.

Full story: http://www.govexec.com/story_page.cf...171&dcn=e_gvet

SWSOP

**Gilligan** · 10-19-2006, 04:47 AM

posted this info today.
October 16, 2006
TSP board mulls legislative agenda
By Karen Rutzick
krutzick@govexec.com

One change being discussed is automatic enrollment upon hiring.

Another possibilty is to change the default fund from the "G" fund to an "L" fund automatic enrollment upon hire.

http://govexec.com/story_page.cfm?ar...dcn=todaysnews

**Gilligan** · 11-21-2006, 10:03 AM

November 20, 2006

Consultants advise against adding real estate fund to TSP
By Karen Rutzick
krutzick@govexec.com

A consulting firm delivered a long-awaited report Monday advising Thrift Savings Plan officials not to add a controversial real estate fund to the 401(k)-style retirement savings program for federal employees.

http://govexec.com/story_page.cfm?ar...dcn=todaysnews

**Gilligan** · 12-01-2006, 11:46 PM

December 1, 2006

TSP investments grow steadily in November
by Karen Rutzick
krutzick@govexec.com
http://govexec.com/story_page.cfm?ar...dcn=todaysnews

Each of the five basic funds in the Thrift Savings Plan posted solid gains in November.

The 401(k)-style retirement savings plan for federal employees, now worth more than $200 billion, made the biggest strides last month in investments in small- and mid-sized domestic companies. The S Fund, which invests in these companies by tracking the Dow Jones Wilshire 4500 Index, earned 3.54 percent in November for a 12-month total return of 15.61 percent.