The Thrift Board blinked.
In the showdown over the path of the I (international) Fund between the Federal Retirement Thrift Investment Board (Thrift Board) and a miscellaneous group of lawmakers headed by Senator Marco Rubio (R-FL), the Thrift Board beat a hasty retreat, which they announced Wednesday. Up until now, the Thrift Board and the Rubio Crew were staring each other down, just like they would have done in a playground dispute back in grade school.
The dispute revolved around the investments that make up the international portion of the Thrift Savings Plan.
Since its inception in 2001, the I Fund has tracked the Morgan Stanley Capital International Europe, Australasia and Far East Index (MSCI EAFE). The Thrift Board decided a couple of years ago to change the index tracked by the I Fund to the Morgan Stanley Capital International All World Index (MSCI ACWI ex-US Investible Market index). The decision was made in order to bring the TSP into sync with the major private sector plans that have been using the broader based All World Index for the international portion of the funds offered to their employees.
The problem arose because, at least the last time I looked, China is part of the world and Chinese companies are represented in the MSCI All World Index. The Rubio Crew objected to having TSP participants invest in China, the current bete noir of many in public office, and insisted that the Thrift Board not go ahead with the change.
In response to this concern, the Thrift Board revisited their decision in 2019 and, after revisiting the decision, the Board decided to go ahead with the change in 2020 anyhow. That’s when the Rubio Crew, staring defeat in the face, called in the biggest kid on the playground to help them.
The biggest kid on the playground happens to be Donald J. Trump, the President of the United States. When President Trump sided with little Marco and his friends, the TSP backed down.
But wait, just like in a playground dispute, the Thrift Board, while backing down, didn’t admit to being intimidated by the big kid. Here’s what the Board said in Wednesday’s press release:
Due to a meaningfully different economic environment related in large part to the impact of the global COVID-19 pandemic, as well as the nomination of three new Federal Retirement Thrift Investment Board Members, pending further study, the Board is delaying the implementation of the I Fund benchmark to the MSCI ACWI ex-US Investible Market index from the MSCI EAFE index.
Is this over yet? We will see.