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Thread: TSP to open retirement fund management to competitive bids

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    TSP to open retirement fund management to competitive bids

    By Karen Rutzick
    krutzick@govexec.com

    In a move that could save tens of millions of dollars, Thrift Savings Plan officials announced Friday that they will put the management of four existing investment funds up for competition early next year.

    The TSP, the government's 401(k)-style employee retirement plan, manages more than $167 billion in assets for approximately 3.5 million participants. Four of the plan's funds - the C Fund (common stocks), S Fund (stocks in small and mid-size companies), I Fund (international stocks), and F Fund (fixed-income securities) - are managed by an investment firm. A fifth fund - the government securities G Fund - is a risk-free, low earnings fund administered through the Treasury Department.

    The TSP also now includes an L (for "life cycle") Fund, which allocates a portion of TSP savings into each of the five funds based on participants' age, automatically putting more money into lower-risk funds as participants get closer to retirement.

    Since its inception in 1986, the TSP has contracted with Barclays Global Investors to manage the C and F funds and, later, the S and I funds. The funds' management has been open to competition in the past, and it is just by "coincidence" that Barclays won all the contracts, according to TSP Executive Director Gary Amelio.

    This year will represent the first time, however, that all four funds will be competitively bid at the same time, which TSP administrators think will get the plan a better deal. "Barclays does a fine job," Amelio said. "We want to make sure next year's bidding is very robust."

    Amelio discussed the bidding process Friday in a meeting of the Employee Thrift Advisory Council, a group of representatives of labor unions and employee associations who advise the TSP board on investment policies and administrative matters.

    To assist in the bidding process, the TSP has hired an outside contractor for the first time. Amelio said the firm, Ennis Knupp & Associates of Chicago, will receive between $175,000 and $360,000 a year for its services.

    Amelio said the TSP board could contract the four funds out to a single bidder, four different companies, or even divide it smaller, giving various duties within each fund to different companies.

    In addition to the competitive bidding process, Ennis Knupp will consult with the TSP on a possible index switch for some of the funds. All the funds in the TSP are passively managed, meaning they track a major existing investment index and don't require an investor to pick and choose stocks. Right now, for example, the C Fund tracks the S&P 500, a broad market index made up of stocks of 500 medium-to-large size U.S. companies.

    The consultants also will advise the TSP on possible fund additions, including a Real Estate Investment Trust fund. Sixty-eight members of Congress have co-sponsored a bill (H.R.1578) to add such a fund to the TSP. The TSP board has come out against the idea.


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    Default Real Competition?

    This may be one case where competition does not improve the process. The TSP already has about the lowest ER (expense rates) than any mutual fund company including Vanguard and Fidelity. As I understand this various mutual funds lobbyed Congress to get this openned up because they wanted a piece of the action and the ER were TOO LOW! This could be a wolf in sheeps clothing.
    If there is a real competition and the rates ERs stay where they are or go down a bit I will be pleased. I suppose Vanguard or Fidekity could bid and keep the ERs down But we will all have to keep an eye on this one as low ERs are a really significant of anyones retirement investing and especially in the TSP.

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    Default

    Quote Originally Posted by yakers
    This may be one case where competition does not improve the process. The TSP already has about the lowest ER (expense rates) than any mutual fund company including Vanguard and Fidelity. As I understand this various mutual funds lobbyed Congress to get this openned up because they wanted a piece of the action and the ER were TOO LOW! This could be a wolf in sheeps clothing.
    If there is a real competition and the rates ERs stay where they are or go down a bit I will be pleased. I suppose Vanguard or Fidekity could bid and keep the ERs down But we will all have to keep an eye on this one as low ERs are a really significant of anyones retirement investing and especially in the TSP.
    Vanguard is known through out the industry for their "LOWEST" fees. Also if Vanguard took over our funds we would have access to all their funds. That would be the best thing we could hope for. (haven't heard anything about this til now)

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    Default

    this worries me. any time there is the amount of money that is in tsp and
    there is talk of opening to "what"? It's not broken, so let it be.

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    Default GoivExec

    I went to the GovExec website and noticed that Vanguard was the only mutual fund company advertising on the site.

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    Default Re: TSP to open retirement fund management to competitive bids

    "The consultants also will advise the TSP on possible fund additions, including a Real Estate Investment Trust fund. Sixty-eight members of Congress have co-sponsored a bill (H.R.1578) to add such a fund to the TSP. The TSP board has come out against the idea."

    Why? Or a gold fund?
    Retired 2018:Time is the only non-renewable resource. Knowledge is the only sustainable competitive advantage. 60% C, 20% S & 20% I Fund. https://share.robinhood.com/cliffow

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    Default Re: TSP to open retirement fund management to competitive bids

    Quote Originally Posted by wwwtractor View Post
    "The consultants also will advise the TSP on possible fund additions, including a Real Estate Investment Trust fund. Sixty-eight members of Congress have co-sponsored a bill (H.R.1578) to add such a fund to the TSP. The TSP board has come out against the idea."

    Why? Or a gold fund?

    Now THAT is an old story- from 2006.

    The real estate trust never flew. Thankfully, Congress didn't pass it. If they had, all your dollars could have been in subprime mortgages by now, and gone.

    As for the gold fund- there isn't a gold fund out there big enough to come close to the possible size of TSP's investments. Find me gold stocks sufficient to absorb 230 billion in new assets, without severely affecting the price, and that's why there is no gold fund. If everyone in TSP shifted to the gold fund, we'd knock it out of kilter.

    By the way- I saw last night that the United Kingdom Government is looking at Barclays- one of the few banks still not involved in their government takeover so far in the UK-

    http://www.telegraph.co.uk/finance/n...this-mess.html

    It's a mess.

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