Thrift Savings Plan to Change I Fund Index

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Barry Barnitz
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Thrift Savings Plan to Change I Fund Index

Post by Barry Barnitz » Thu Dec 07, 2017 5:52 am

Hi:

News release: TSP to Change I Fund Index, Leave Others as Is, December 6, 2017, Fedweek
The TSP’s governing board has decided to replace the current index used in its international stock I fund, [moving from] the MSCI Europe, Australasia, Far East benchmark of large company stocks in about two dozen countries [to the} MSCI All Country World Index, which covers non-U.S. developed markets, smaller companies and emerging markets. Among other things, that means that the index will reflect stocks of Canada, the fourth-largest stock market in the world.

The transition to the new index likely will take a year or more, however.
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BrianMc
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Re: Thrift Savings Plan to Change I Fund Index

Post by BrianMc » Thu Dec 07, 2017 9:01 am

Terrific news for those of us who tried to replicate the MSCI All Country World via the I Fund and other mutual funds and/or ETFs. Good move by the Board!

stan1
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Re: Thrift Savings Plan to Change I Fund Index

Post by stan1 » Thu Dec 07, 2017 9:17 am

Good news for diversified investors, hopefully it will take Congress and lobbyists a long time to figure out TSP will be investing in companies based in China, Russia, UAE, Qatar, Egypt, Turkey, and Pakistan plus whatever counties over time that get added to the index. TSP will be investing federal employee and military member retirement funds in companies domiciled in a country the US has economic sanctions against (that's a fact not a political statement). FRTIB has done a great job for over 30 years keeping TSP away from politics and lobbyists but I'm afraid this change will make it harder going forward.

Engineer250
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Re: Thrift Savings Plan to Change I Fund Index

Post by Engineer250 » Thu Dec 07, 2017 12:03 pm

Thanks I would have missed this news otherwise and it is good news. My IRA and Roth and 401k are more complicated than I would like since I have to hold emerging and international small to balance out my I Fund. Looking forward to when they make the transition and I can go back to holding Total US and Total International everywhere else. Also makes my plan to get my tIRA into the TSP (rather than 401k) seem like a good decision long term.
Where the tides of fortune take us, no man can know.

MnD
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Re: Thrift Savings Plan to Change I Fund Index

Post by MnD » Sat Dec 09, 2017 10:36 am

stan1 wrote:
Thu Dec 07, 2017 9:17 am
TSP will be investing federal employee and military member retirement funds in companies domiciled in a country the US has economic sanctions against (that's a fact not a political statement). FRTIB has done a great job for over 30 years keeping TSP away from politics and lobbyists but I'm afraid this change will make it harder going forward.
Adding the I fund originally faced opposition from some members of congress who stated it was unpatriotic/wrong but that argument got no-where. Improving the plan by using broader indices requires no such approval and is completely in line with current best investment practices.

There is no simple list of "countries sanctioned" but rather specific programs to further various policy goals.
https://www.treasury.gov/resource-cente ... grams.aspx

Compliance with sanctions is one of many factors in index construction and maintenance and Blackrock MSCI ACWI ex USA IMI has that covered.
Specifically see page 103 of the index methodology report
https://www.msci.com/eqb/methodology/me ... dology.pdf
Countries subject to economic sanctions: MSCI does not cover certain countries for which
significant economic sanctions are applied. Examples of such countries as of May 2017 are
Cuba, Democratic Republic of the Congo, Libya, North Korea, Iran, Iraq, Somalia, Sudan and
Syria. Companies that are classified to and/or incorporated in such countries are not eligible for
inclusion in the MSCI Global Investable Market Indexes. MSCI regularly assesses eligibility of
new markets and communicates their potential inclusion in the MSCI GIMI in advance of
implementation.

stan1
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Re: Thrift Savings Plan to Change I Fund Index

Post by stan1 » Sat Dec 09, 2017 10:44 am

MnD wrote:
Sat Dec 09, 2017 10:36 am
stan1 wrote:
Thu Dec 07, 2017 9:17 am
TSP will be investing federal employee and military member retirement funds in companies domiciled in a country the US has economic sanctions against (that's a fact not a political statement). FRTIB has done a great job for over 30 years keeping TSP away from politics and lobbyists but I'm afraid this change will make it harder going forward.
Adding the I fund originally faced opposition from some members of congress who stated it was unpatriotic/wrong but that argument got no-where. Improving the plan by using broader indices requires no such approval and is completely in line with current best investment practices.

There is no simple list of "countries sanctioned" but rather specific programs to further various policy goals.
https://www.treasury.gov/resource-cente ... grams.aspx

Compliance with sanctions is one of many factors in index construction and maintenance and Blackrock MSCI ACWI ex USA IMI has that covered.
Specifically see page 103 of the index methodology report
https://www.msci.com/eqb/methodology/me ... dology.pdf
Countries subject to economic sanctions: MSCI does not cover certain countries for which
significant economic sanctions are applied. Examples of such countries as of May 2017 are
Cuba, Democratic Republic of the Congo, Libya, North Korea, Iran, Iraq, Somalia, Sudan and
Syria. Companies that are classified to and/or incorporated in such countries are not eligible for
inclusion in the MSCI Global Investable Market Indexes. MSCI regularly assesses eligibility of
new markets and communicates their potential inclusion in the MSCI GIMI in advance of
implementation.
You are using logic but there's a lot of emotion in politics. We'll have to see how it goes.

Iorek
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Re: Thrift Savings Plan to Change I Fund Index

Post by Iorek » Sat Dec 09, 2017 10:50 am

That is good news. For a while I tried to complete my TSP investment with an emerging markets fund but quickly decided that was not for me ;)

mouth
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Re: Thrift Savings Plan to Change I Fund Index

Post by mouth » Sun Dec 10, 2017 12:56 pm

So I know they say in the announcement they exclude US ... but the info for the ACWI at MSCI's web page indicates it includes the US ... as the name implies, ALL WORLD COUNTRIES

https://www.msci.com/acwi

What am I missing?

UPDATE: Clearly I'm missing the AWCX vs AWCI indexes. Never mind.

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