The Federal Retirement Thrift Investment Board (FRTIB) will be updating the benchmark index for the I Fund throughout 2024, aiming to broaden the fund’s diversification and grant participants access to a wider array of international markets and companies.
Background on the Change
The decision to expand the I Fund’s benchmark index was initially made by the FRTIB in 2017, with plans to include an emerging markets index starting in 2020. However, the proposed changes faced significant opposition due to the inclusion of investments in China. In response to concerns from lawmakers about safety and ethical implications, the FRTIB selected a new benchmark that excludes China and Hong Kong.
To implement the transition, TSP fund managers will gradually sell and buy specific stocks, spreading these transactions over several months to minimize costs and avoid any potential trading disadvantages. The transition is expected to be completed by December 31, 2024.
What’s Changing in the I Fund?
Currently, the I Fund tracks the MSCI Europe, Australasia, and Far East (MSCI EAFE) Index. Going forward, it will shift to 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 shift will expand the number of companies in the I Fund from approximately 800 to over 5,000, including stocks from 23 emerging markets. The FRTIB’s analysis suggests that this change will potentially offer higher returns without substantially increasing risk.
Maintaining Access to Your I Fund
Throughout the transition to the new benchmark index, participants will retain full access to the I Fund. Existing investments in the I Fund will remain intact unless you decide to make changes. You can continue to adjust your investment elections, reallocate assets, or transfer funds within the I Fund as usual. The I Fund remains a valuable option for diversifying the equity portion of your TSP portfolio, offering exposure to a broad range of international stocks outside the U.S.
For personalized advice on the I Fund and how these changes may impact your investment strategy, consider consulting an FRC® certified advisor.
