TSP Participants Chase International Returns

February 21, 2005 (PLANSPONSOR.com) - Participants in the federal Thrift Savings Plan (TSP) are chasing hefty returns in the international equity market by moving more of their TSP assets into international funds.

A govexec.com news report said that for the 12 months ending January 2006, employees in the older Civil Service Retirement System bumped up their international allocation in the TSP’s I Fund from 4% to 6%. Over the same time period, employees in the newer Federal Employees Retirement System moved from allocating 5% of investments to the I Fund to 8%.

The report said that for that time period, the I fund was the TSP’s top performer with a 22.91% advance.

The movement is also illustrated by interfund transfers, according to the govexec.com report. 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%.

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.”