[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]The Federal Retirement Thrift Investment Board (FRTIB), the agency that is in charge of managing the Thrift Savings Program for current and former federal employees, held a meeting this week which included the topic of revisiting and possibly changing the Board’s 2017 approved decision to begin investing their funds to a different international market index that would have money goes into companies based in Communist China.
Back in 2017, the Board decided to move TSP’s I Fund tp the MSCI All Country World Ex-US Investable Market Index from the current MSCI Europe, Australasia, and Far East Index. This change would be implemented in 2020. The investment change will go from a focus on European, Australian, New Zealand, Hong Kong, and Japan indexes to a larger scale of 48 markets worldwide, which includes China.
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A few months ago, Senators Jeanne Shaheen D-NH and Marco Rubio R-FL urged Michael Kennedy, the Chairman of the FRTIB, to stop this move as current and former federal workers would be inadvertently supporting Communist China and their actions regarding oppressing human rights and their controversial monitoring systems such as the Social Credit system, along with their ever-growing aggression to the US.
This week, more senators urged the Board to stop this decision in a letter. These included Senators Rick Scott R-FL, Josh Hawley R-MO, Kirsten Gillibrand D-NY, and Mitt Romney R-UT along with Shaheen and Rubio.
They state that this move to the new index would take the retirement savings of former and current US Military personnel and federal employees and invest money into companies and equities that help the Chinese military and the abuse of human rights of the Chinese people. They also mentioned that a lot of companies in the Chinese market are not transparent about their finances, and the market has a history of dangers involved and cited a scandal that happened recently with one of the largest accounting firms in China.
The Board did not decide on changing anything during their latest meeting this week regarding the index change. However, Russell Ivinjack and Bill Ryan from Aon Hewitt, the consulting firm that advised on the new index, reanalyzed the matter and still agree that this switch is recommended. Ivinjack mentioned that the TSP is required by law to provide an I fund that widely and thoroughly represents non-US investments. He said that the current representation at roughly 58% of non-US investments, but that the new index would move that number up to 99%, which is closer to meeting the required law. He also stated that the company did not advise on this change in the index in the past because of the high risk of liquidity. However, in 2017, that risk marginalized as markets progressed in development, and there were improvements on index managers managing liquidity problems unlike before, which is why they recommended the move.
Bill Ryan, a partner at Aon Hewitt, said that analysis showed that the performance of the new index outdid the current index in both weak and strong global market conditions, along with the Chinese financial transparency issues in mind.
A member of the FRTIB, Bill Jasien, asked if tracking emerging markets index that did not involve China would be possible. Still, both Invinjack and Ryan addressed that this strategy would be very risky as it could have investors going after trailing returns.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”35741″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]
