Lawmakers question Thrift Savings Plan investment strategy

[luv2read]

Another hearing on TSP, but still nothing on investigating the real reason behind the limits (i.e. Barclays liquidity pool)????

Lawmakers question Thrift Savings Plan investment strategyBy Alyssa Rosenberg arosenberg@govexec.com July 10, 2008

A House hearing Thursday on creating opportunities for women and minorities to play a larger role in managing the Thrift Savings Plan turned into a debate over whether the plan should shift from its current cautious style to a more ambitious, riskier, approach.
House Oversight and Government Reform Federal Workforce Subcommittee Chairman Danny K. Davis, D-Ill., said the TSP's investment approach makes it harder for the plan to work with minority- and women-owned financial management firms.
"The executive director of the Federal Retirement Thrift Investment Board revealed that there are minority firms with talent in long-term financial management," Davis said. "However, most of those firms gravitate toward the active fund management business, which is not an investment strategy of the TSP. Research by the TSP indicates that there may be only one minority-owned firm that deals with passive management of index funds."
But Gregory Long, executive director of the board, said the law has dictated the TSP's focus on funds that track the performance of the stock market rather than the use of active managers to make trades aimed at outperforming the market. The purpose has been to minimize risks and fees for users and avoid concerns over political manipulation of large pools of funds. Long said the conference report on the creation of the TSP specifically noted that active fund management could lead to lawmakers or interest groups pressuring fund fiduciaries to create investment options that would support specific industries.
"In the past we have seen different industry groups that want to receive favorable treatment from the TSP," Long said. "There was a group that represented a real estate investment trust that thought we should have a real estate trust. There might be rational reasons behind those goals, but that's not what we do. We look out for the best interests of the beneficiaries."
Del. Eleanor Holmes Norton, D-D.C., said Long and the board should do more research into whether they could achieve better returns through other methods, especially given changes in the economy.
"I don't mind you concentrating on your work, but it seems that out of intellectual curiosity, you would want to know about state teachers' funds, a plethora of funds in the market," Norton said. "We need to get to the bottom of what it is we're afraid of so we could know if we can hedge against it in some way, or if this is the best strategy that we have."
Jarvis Hollingsworth, former board chairman of the Teacher Retirement System of Texas, said he understood that large pools of actively managed funds were an invitation to lobbying, but not necessarily manipulation.
"I've never been of the opinion that you can legislate morality," Hollingsworth said. "Each member has to execute their ethical and fiduciary responsibilities. We did do some things such as have certain ethical disclosures in place, such as when a board member met with a fund manager. That information under our policy had to be disclosed."
Edward Swan, former president of the investment company FIS Group, said concerns about political manipulation were overblown and might prevent fiduciaries from considering viable investment offerings.
"I hear this concern about political manipulation, but I'm not sure what that manipulation might be," Swan said. "The only example I hear was that some people showed up and said, 'why don't you look at commodities?' It might be a good idea; it might be a bad idea. If someone has a real example, I'd like to respond to it."

 

[Gumby]

Another hearing on TSP, but still nothing on investigating the real reason behind the limits (i.e. Barclays liquidity pool)????

I think it is quite clear that Long only wants to limit a TSP investor to the Funds that TSP tracks. He seems to think that no person can beat the market on their own.

I would like to know how many millions TSP investors have lost since March. With the market volitility and the IFT limits, investors should be prepared to lose more of their capital until the oil bubble bursts. As long as Iran gets attention from sabre rattling, the price of oil will continue to escalate and have a drastic impact on the value of the dollar.

 

[Silverbird]

Those of us who work in a regulatory or negotiations role were told that the TSP funds were general and we would not have to worry about having to recuse ourselves from funds in the TSP. Insider knowledge or regulatory/negotiatory authority in a certain industry or industries doesn't help figure out how the entire market is going to go.

I guess it would be ok to have new targetted funds as long as Feds aren't automatically signed into them and the general funds still existed.

The matter of limited IFT's is a completely different kettle of fish, IMNSHO, if I want to change my portfolio once a week I don't see what's the problem.

 

[luv2read]

I think it is quite clear that Long only wants to limit a TSP investor to the Funds that TSP tracks. He seems to think that no person can beat the market on their own.

I would like to know how many millions TSP investors have lost since March.

me too.

 

[EEK! 5 YEARS TO GO!]

I think it is quite clear that Long only wants to limit a TSP investor to the Funds that TSP tracks. He seems to think that no person can beat the market on their own.

Why must we be limited to funds that TRACK the market rather than funds that OUTPERFORM the market? In a BEAR market, we will always LOSE, and it will take YEARS to make it up. Some of us don't have that TIME. FRTIB should consider adding funds that DO WELL IN BEAR MARKETS to balance the mix - we're looking at 18 months minimum for a recovery to even START.

I've read ERISA. It doesn't specify a "passive" investment strategy. It specifies fiduciary responsibility in the best interests of the members. Limiting funds to those that track the market (currently a BEAR) is NOT in the best interests of the members, nor is limiting IFT's in ANY market in the best interests of the members. The two issues are intertwined.

 

[Gumby]

Why must we be limited to funds that TRACK the market rather than funds that OUTPERFORM the market? In a BEAR market, we will always LOSE, and it will take YEARS to make it up. Some of us don't have that TIME. FRTIB should consider adding funds that DO WELL IN BEAR MARKETS to balance the mix - we're looking at 18 months minimum for a recovery to even START.

I've read ERISA. It doesn't specify a "passive" investment strategy. It specifies fiduciary responsibility in the best interests of the members. Limiting funds to those that track the market (currently a BEAR) is NOT in the best interests of the members, nor is limiting IFT's in ANY market in the best interests of the members. The two issues are intertwined.

I agree with you 100%. The reason there isn't more funds is that Long doesn't want you to beat the market and wants to keep administrative expenses low.....and with the IFT restriction you will lose money until you bail to the safety of G or ride the market down. No way to make money in a bear market without moving between the existing funds and our hands are tied.
The bears are eating away at our retirement savings everyday.....and we can't even buy an IFT at any price.

 

[CountryBoy]

[/QUOTE]I've read ERISA. It doesn't specify a "passive" investment strategy. It specifies fiduciary responsibility in the best interests of the members. Limiting funds to those that track the market (currently a BEAR) is NOT in the best interests of the members, nor is limiting IFT's in ANY market in the best interests of the members. The two issues are intertwined.[/QUOTE]

Their interest was never what was best for us members, but what was best for barclays. They are de facto employees of barclays. Their intent was always to stick it to us and bail out barclays.

CB

 

[luv2read]

More on this Hearing at this post and thread, important information about Barclays and possible changes from passive to active investment strategy. In other words, maybe more IFT's.

http://www.tsptalk.com/mb/showpost.php?p=172089&postcount=127

http://www.tsptalk.com/mb/showthread.php?p=172159&posted=1#post172159

 

[Buster]

Well, that's encouraging news..

 

[Guest2]

More on this Hearing at this post and thread, important information about Barclays and possible changes from passive to active investment strategy. In other words, maybe more IFT's.

http://www.tsptalk.com/mb/showpost.php?p=172089&postcount=127

http://www.tsptalk.com/mb/showthread.php?p=172159&posted=1#post172159

I'll go back to read the above posts. But from my original understanding,
increased IFT's was not on the table. I believed the goal was to have the
TSP Managers hire Active Investment Traders to increase returns. Kinda
like the TSP participants were doing before limits. Anyway, I'll go back and
read the above and thanks for the update.
:worried:

 

[luv2read]

Right SB. However, IMO how can the Committee NOT revisit the IFT limits if they are looking at active vs passive investment strategies - and as you point out, that's exactly what we were doing OURSELVES before BGI screamed Uncle last year when their liquidity pool came up short?

Apologies if I misled anyone into thinking that IFT limits are "on the table" now, but IMO it's just a matter of time if they continue in this vein.

 

[Guest2]

However, IMO how can the Committee NOT revisit the IFT limits if they are looking at active vs passive investment strategies

It's not they CAN not, its that they WILL not revisit the issue. In the
eyes of the Board, should active investment become a requirement, they
have already decided that the TSP participants are not capable. Further,
the cost for participants to do so, can not be controlled. Should this ever
come about (IMHO, Doubtful) the costs will fall on the experts and thereby
becoming a justifiable expenses in doing business. I THINK ?
COMMISSIONS CAN BE MOTIVATING

 

[luv2read]

I think a choice of active vs passive that includes a Roth and a "bear market" fund, would be better than what we have now. L Funds are still passive no matter how much spin TSP puts on them. We need choice in a diversity of funds that are designed to BEAT, not TRACK, the market. Tracking a bear market (unless you're shorting it) is a losing proposition, that's what we're doing, so we're set up to fail. As far as that goes, in good times, what's so wrong about trying to beat a BULL market, anyway?

 

[Guest2]

I think a choice of active vs passive that includes a Roth and a "bear market" fund, would be better than what we have now. L Funds are still passive no matter how much spin TSP puts on them. We need choice in a diversity of funds that are designed to BEAT, not TRACK, the market. Tracking a bear market (unless you're shorting it) is a losing proposition, that's what we're doing, so we're set up to fail. As far as that goes, in good times, what's so wrong about trying to beat a BULL market, anyway?

Not a thing my mentor ! I wish it was different ! They SUCK for doing
my retirement goals wrong. But to think someone would pull their head
out of their ass long enough to see some daylight, well, enough said.

The Bottom Line; I can no longer retire at eligability age and now must
stay until Mandatory Retirement age. I blame that on the restrictions that
were imposed on us. Until the Bull comes back, I can only hope for two
things; #1- I stay lucky by doing my homework against the Bear.
and #2- Someone reads your common sense view and see's God before
I'm too old to take the risk.

 

[James48843]

More on this Hearing at this post and thread, important information about Barclays and possible changes from passive to active investment strategy. In other words, maybe more IFT's.

No, that's not what they are talking about. No chance on more IFTs.

What they are talking about is trying to farm out to diverse companies the running of actively managed mutal funds as an option. Perhaps a dozen or more small businesses to run mutual funds.

Bad idea, in general, if the costs for running them are anything like conventional mutual funds. The only good thing is the possibility to have some specialized sector funds out there, so you can run to gold, or something else.

In reality though- it will never happen, because the amount of money involved. TSP is now a 240 BILLION dollar investment pool. Imagine of all 240 BILLION got plowed into gold stocks at the same time. the market couldn't absorbe that all at once.

Is probalby a non-starter.

Although the Roth thing will be a done deal, allowing multiple small business mutual fund managers to play with money is probably not doable.

 

[luv2read]

No, that's not what they are talking about.

I know they're not talking about IFT's now (said so below in response to SB's post), but I think this talk of active vs passive investment opens the door to re-address the issue. We were doing that ON OUR OWN before FRTIB interfered on Barclay's behalf and limited the IFT's. If the Committee would just look at the whole picture, it's obvious that allowing shareholders to IFT at will would provide active management at the least cost.

 

[Guest2]

I know they're not talking about IFT's now (said so below in response to SB's post), but I think this talk of active vs passive investment opens the door to re-address the issue. We were doing that ON OUR OWN before FRTIB interfered on Barclay's behalf and limited the IFT's. If the Committee would just look at the whole picture, it's obvious that allowing shareholders to IFT at will would provide active management at the least cost.

L2R, it could very well be a opportunity to justify past practices and our
ability to do the same at a lower cost. But I couldn't begin to say what
would be needed to get that ball rolling down Capital Hill. It would appear
that politics would prevent anyone from looking at the whole picture. The
original fight to stop this from happening was not only frustrating, but it
was exhausting. Too many (including myself) have tried to move on, only
to be reminded of what could have been on a daily basis. Support from
the masses would need to be greater then the original fight. Maybe thats
why I'm now part of the problem, instead of being part of the solution. I'm
just sick over the whole thing and tired of wasting my time over something
I never had any control of to begin with.

 

[luv2read]

Agreed SB. Our shining knights were knocked off their steeds by foul means and I don't expect them to climb back on to get bashed again. At least it woke up the sleeping dogs and most of them said "huh? I could be making more?" I DO expect an uproar from "the masses" when they get their annual statements and they see that not only didn't they make money but they lost their contributions and matching as well, especially L Funders. IMO it's just a matter of time before the whole Barclays contract/IFT issue is investigated. Barclays has had a monopoly for 20 years SINCE THE INCEPTION of TSP and I for one find it hard to believe that no US firm offered a better product/service at a comparable price during all those years when the RFP's were issued.

I too am tired of it. All we can do is watch and wait. In the meantime, live, love, enjoy!

 

[CountryBoy]

I agree with both of you guys, l2r and sq,

I'm just sick having to sit on the sidelines, when I could've jumped in and made some more money when oil fell, I knew that it would help the markets, but nooooo, our nimrods on the board are in barclays pockets and they must take care of that master and to hell with us. I too am trying to get past this.

A year from now, I'll have several hundred more to invest monthly as my daughter graduates from college and goes out on her own. But fot the life of me, I'm leaning to putting the money somewhere else besides the TSP, for a couple of reasons. Lack of choice and IFT limitations and to tell the truth, I'm beginning to worry about the safety of my funds, with congress game playing with politically correct funds and who to hell knows what barclays is doing under the board, obviously they got some body parts caught in the wringer and the board had to bail them out by screwing us over.

Enough of this, it's just a downer.

Ya'll have a good one and GL investing.
CB