As previously announced, the Federal Retirement Thrift Investment Board (FRTIB) will update the benchmark index for the I Fund throughout 2024. This change aims to enhance the diversification of I Fund investments, providing participants access to a broader range of markets and companies.
A Long Anticipated Change
In 2017, the FRTIB decided to expand the I Fund to include an emerging markets benchmark, with implementation planned for 2020. However, the plan faced strong opposition because the new I Fund benchmark index included investments in China. After lawmakers voiced safety and ethical concerns, the Board chose a new index that excludes China and Hong Kong.
Timeframe For I Fund Changes
To transition to the new benchmark index, TSP fund managers will need to sell certain stocks and purchase others. To minimize costs, these transactions will be strategically timed and spread out over several months. Exact dates and times cannot be disclosed in advance in order to protect the fund from potential unfair trading advantages. The transition will be finalized by December 31, 2024.
“After a comprehensive analysis, the Board anticipates the new index will offer the potential for higher returns without significantly increasing risk.”
What’s New In The I Fund?
According to tsp.gov, the I Fund’s current benchmark is the MSCI Europe, Australasia and Far East (MSCI EAFE) Index. The future I Fund benchmark will be the MSCI All Country World Investable Market Index ex USA ex China ex Hong Kong (MSCI ACWI IMI ex USA ex China ex Hong Kong) Index. This change will increase the number of companies represented from roughly 800 to over 5,000. Furthermore, it will now include 23 emerging markets. After a comprehensive analysis, the Board anticipates that the new index will offer the potential for higher returns without significantly increasing risk.
You Won’t Lose Access To Your I Fund
During the transition to the new benchmark, you will maintain full access to the I Fund. Your current investments in the I Fund will remain unless you choose to make changes. You can continue to reallocate, transfer funds, or modify your investment elections involving the I Fund.
Investing in the I Fund provides the chance to benefit from equity ownership in non-U.S. companies. Representing stocks from numerous developed countries (excluding the U.S.), it offers an excellent means to diversify the stock portion of your TSP allocation. Reach out to an FRC® trained advisor to see if the I Fund is right for you.
