January 21, 2015
Interested in investing in other funds besides those offered in the TSP? For example, in “socially responsible” funds, real estate funds, precious metals, or emerging markets?
The TSP Enhancement Act of 2009 granted the Federal Retirement Thrift Investment Board the authority to establish a “Mutual Fund Window” through which TSP investors could invest in a wider universe of funds, and more than five years later, the board provided their “conceptual support” to the creation of a MFW late last year.
As the next step in the process, the board also gave the go-ahead to develop a detailed MFW implementation plan to be reviewed and decided upon “at some point in 2015.” (The MFW is outlined in this memo.) The implementation plan would include costs, risks, and project schedule.
The Mutual Fund Window also has the “conceptual support” of the Employee Thrift Advisory Council, which is a good sign that it will ultimately be implemented.
It’s interesting to note that, while there will be a fee associated with investing in funds through a MFW, all TSP participants will share the costs associated with actually establishing the MFW. Rough estimates of the cost to set up the MFW are $6-$10 million, with another $1 million annually to maintain the MFW, according to the memo noted above. That would be about a 0.002% additional cost for current investors, assuming around $500 billion in total assets in the TSP when it is set up.
Unless it is fast-tracked – and assuming final approval – I wouldn’t expect to see a MFW until 2016 or later due to the significant time needed to complete the final study, gain final board approval, float the RFP and select a contractor to establish the MFW, and educate participants.