Dividends - Fair Valuation ???

[ekatteng]

The I - Fund follow the EFA i-Shares. and if we go back and see all the dividends the EFA i-Shares had since 2003 and the I - Fund was created.
The I - Fund is $0.66 Under Value. I still do not understand how $0.66 Under Valuation or Under Dividend Paid is called FAIR VALUATION. :confused:
We should demand from the TSP board a continue audit to the I - Fund Management. :mad:

[350zCommTech]

The I - Fund follow the EFA i-Shares. and if we go back and see all the dividends the EFA i-Shares had since 2003 and the I - Fund was created.
The I - Fund is $0.66 Under Value. I still do not understand how $0.66 Under Valuation or Under Dividend Paid is called FAIR VALUATION. :confused:
We should demand from the TSP board a continue audit to the I - Fund Management. :mad:


The EFA is not the I fund.

Please read: http://www.tsptalk.com/mb/showthread.php?t=4108

[Barney]

The EFA is not the I fund.

Please read: http://www.tsptalk.com/mb/showthread.php?t=4108

350, I haven't introduced myself to you yet, but I get alot from your posts. So, Thanks for everything. The link you provided has 'Wheels' on it. I remember when I first started lurking, I read his comments. But now I see he is deleted. What happened to Wheels? Do you know?

[350zCommTech]

350, I haven't introduced myself to you yet, but I get alot from your posts. So, Thanks for everything. The link you provided has 'Wheels' on it. I remember when I first started lurking, I read his comments. But now I see he is deleted. What happened to Wheels? Do you know?

You're welcome.

As for Wheels, you got PM.

[cyoa1fan]

The I fund maybe an Index but Barclays is purchasing EAFE Index Fund "E". My question is how much are they really charging us and how do they calculate those charges to include the Dividends and Profit Sharing we are recieving(if any after charges)? The EAFE payed out $1.56 per share last year and $2 per share this year, show me physically how much we got paid. They say it's calculated in daily, but how?!:confused:


"The I Fund invests in the Barclays EAFE Index Fund by purchasing shares of the Barclays EAFE Index Fund “E,” which in turn
holds primarily shares of the Barclays EAFE Index Master Fund"
( http://www.tsp.gov/rates/fundsheet-ifund.pdf )

[nelsonal]

To quote the old Ragu commercial, it's in there. Here's an example:
We'll use $10,000 invested in the I fund and EFA etf to show that dividends are in the I fund and the expense ratio is considerably lower than at the ETF.

On Dec 29 2006 (the last business day of the year) the I fund was at $22.22. Investing $10,000 buys us 450.045 shares. At the end of 2007 each share is worth $24.76, so our stake is worth $11,143.11. We had a nice year with an 11.4% return.

The EFA ended 2006 with a value of $73.22, our $10,000 buys 136.575 shares, to those playing along at home, I realize you can't buy a partial share of an ETF, but didn't want to consider that when focusing on dividends and admin costs. The EFA pays a single annual dividend, $2 in 2007, paid on Dec 21, this buys us an extra 3.476 shares. Thus, we end the year with 140.051 shares which each have a value of $78.50. Our EFA infestment is worth a total of 10993.99. Still a nice return of 9.9% for the year. The difference comes from the ETF at a premium to NAV at the beginning of the year (NAV was 72.95 so you were paying extra vs an open ended fund), but at a discount at the end of the year (NAV was 78.92). On a NAV basis, there's an extra 1% so the return was 10.9%, the difference being attributatble to about 30 bp of extra management fees, and the single dividend payment that occured was reinvested at a relatively high NAV rather than as payments occured.

[cyoa1fan]

I think the TSP is giving us generic brand of Ragu and not the one with the meaty chunks-
If I'm reading this right the TSP I fund is based on the
Morgan Stanley Capital International (http://en.wikipedia.org/wiki/Morgan_Stanley_Capital_International) EAFE by Barclays purchasing the MSCI EAFE throught the Barclays Index Fund "E"
http://www.tsp.gov/rates/fundsheet-ifund.pdf

Here is what MSCI EAFE got paid over the years-
http://en.wikipedia.org/wiki/MSCI_EAFE

Here is what we got paid-
http://www.tsp.gov/rates/monthly-history.html

Now the side by side comparison-
MSCI EAFE I Fund
+ dividends + dividends


1998 20.33 20.09
1999 27.30 26.72
2000 -13.96 -14.17
2001 -21.20 -21.94
2002 -15.66 -15.98
2003 39.17 37.94
2004 20.70 20.00
2005 14.02 13.63
2006 26.86 26.32
10-Year
Compound
97.56 92.61

That's a 4.95% difference in annual returns

Now either we are getting charged more than what they are saying or they are watering down our diner.

CYOA(Choose Your Own Adventure):)

[nelsonal]

Most of that is a cost of doing business, management fees are a few bips, trading costs are a few more, holding cash rather than being fully invested cost a few more, and not being able to fully replicate the index costs the most (smaller less liquid companies typically outperform larger firms). Those are called tracking error and are common to any index management sustem.

Since you can't buy the index, compare the I fund with EFA and you'll find that generally our lower costs prevail. I couldn't find values for EFA pre 2001, but 2001-2007, I fund returns an extra $839 including dividends. I fund's CAGR was 14.25% over the period, while EFA's was only 13.52%. See attached chart.

You're correct that we don't have all the index' meaty chunks but we have far more than anyone else.

[cyoa1fan]

Have you been able to access the Barclays EAFE Index Fund "E"? I would love to see the day by day information.

We are being told the only cost are - "TSP account in 2006 were approximately 30 cents per $1,000 of investment." That sounds great but I'm finding the costs maybe higher than what we are being told.


Very interesting attachment :) but where did you get the pricing for the EFA? Did you use the adjusted closing?
http://finance.yahoo.com/q/hp?s=EFA&a=11&b=27&c=2001&d=11&e=31&f=2001&g=d
Wasn't the initial price of the EFAs adjusted close 35.48?

Thanks Nelsonal for the quick responses,

cyoa

[nelsonal]

They're accurate for management fees, but no fund can operate with only management fees (well the G fund sorta). Trading costs are huge (especially a fund size grows). You'll be hard pressed to find any fund that has management fees as low as the TSP funds, but that doesn't mean they can escape all costs. Every competitor index fund will have pretty similar trading, cash drag/futures, and market impact costs, but since management has little control over those they usually aren't a heavily marketed point. They're pretty much taken as a given (which is inaccurate in actively managed funds).

On my historic prices, I split the historic closing price 3:1, as I counted the dividends as new shares purchases (capturing the historic dividend payment/reinvestment prices) rather than adjusting the price, because I'm not sure how Yahoo's adjustments impact discounting.

The E fund is likely just an accounting term for pools in their master index fund, Barclay's (BGI) is one of the biggest institutional index fund providers--most DB pensions use either BGI or State Street. The only difference between the E fund and our I fund should be the costs of printing statements and such that FITSB imposes.

[cyoa1fan]

Real Cost of Investing


These management fees and trading cost is what I’ve been trying to find! The TSP has given us and thanks to you and a couple of other post that have helped me find out our real cost for investment thru the TSP. This post is specific for the I Fund cost of Administration fees, management fees and trading costs -



26.86 26.32 = .54 per share difference
$1000 buys ~ 37shares ( 37.23 using 26.86 and 37.99 using 26.32)
37 share at a difference of .54 per share is $20.51 per $1000

The real total cost is $20.51 per $1000 invested per year if you compare it to what we could have earned without expenses!:worried:

Is that kind of expensive for investment costs? How much do investment cost for an IRA run? What about if I invest through Barclays directly? :confused:

I want them to put the real cost and how much they are making rather than trying to make it look like all they are charging us is administration fees. I like the TSP but I would love it more if they were honest and frank with there numbers.

http://www.tsp.gov/rates/tspexpenseratio2006.pdf (http://www.tsp.gov/rates/tspexpenseratio2006.pdf)

They need to put the real numbers on our Participation statements rather than beating-around-the-Bush.:notrust:

Thanks to everyone that submitted posts for helping me figure this one out! I’ve contacted the TSP office and they could not give me an answer on expenses. :D

Choose Your Own Adventure