February 7, 2019

TSP administrators just did it for you (again…)! And the real rebalancing is taking place in the L Income fund…

As part of a push to expand I Fund holdings, TSP administrators also made the decision to beef up I Fund holdings in each of the L Funds too.

The change took place at the beginning of 2019, according to an announcement on TSP.gov:

Changes coming to the Lifecycle (L) Funds — (November 29, 2018) We are planning adjustments to the L Funds in an effort to improve your investment outcomes. Effective in January 2019, we will increase exposure to international stocks (the I Fund) from 30% to 35% of the overall stock allocation in all L Funds. The L Income Fund stock allocation (C, S, and I Funds combined) will increase from 20% to 30% over a period of up to 10 years. The L 2030, L 2040, and L 2050 overall stock allocations will hold steady for a period of years before resuming their transitions from stocks to bonds. In addition to improving investment outcomes, this pause will align the L 2030, L 2040, and L 2050 Funds with the L 2060 Fund, which will be introduced in 2020 with an initial stock allocation of 99%. Visit Lifecycle Funds to learn more.

Changes weren’t terribly dramatic, for now at least. The L 2030 fund - the middle of the I Fund pack - went from holding 18.04% in the I Fund at the end of 2018 to 21.04% in 2019. The difference was made up in the C and S Fund holdings, with drop from 32.79% to 30.46% and from 9.29% to 8.62% respecitvely.

As you would expect, the biggest increase in the I Fund holdings took place in the L 5050 fund, going from 24.53% to 28.61%.

You can find the latest L Fund holdings here.

The L income fund is the interesting case. While it changed only slightly from 6% to 7.18% in I Fund holdings - and the 80% invested in the bond (G and F) Funds dropped to 79.5% - the stock fund holdings are actually set to increase gradually over the coming years.

The Income Fund will increase from 80-20 bond-to-stock fund holdings in 2018 to 73.5-26.5 bond-to-stock holdings by January 2025. It’s scheduled to continue to increase thereafter, as well.

In contrast, the other L Funds gradually decrease their stock fund holdings gradually.

Something to consider if you are a current or prospective L Fund investor.