This article has been updated.
The TSP I Fund, part of the Thrift Savings Plan, is an international stock index investment fund designed for TSP participants seeking diversification in their investment portfolios. This fund primarily invests in international stock markets, tracking the performance of the MSCI ACWI IMI ex USA ex China ex Hong Kong Index, which includes companies from all international markets except those in China and Hong Kong.
For domestic stocks, there are two TSP funds participants can use: the C Fund, which follows the Standard and Poor’s 500 Index, and the S-Fund, which tracks a completion stock index fund that includes large, medium, and small cap equities.
TSP Investors Avoiding International Stock Index Fund Despite Strong Investment Performance in 2025
The Thrift Savings Plan is the largest employer plan in the world, and now has over $1 trillion in assets (yes, 1 trillion dollars). And yet, a very small percentage of that money, 4.6 percent or approximately $49.5 billion, is invested in the I fund.
TSP Investment Mistake that Most Feds Commit: Not Including the I Fund in their Portfolio
Over the course of 2024, the TSP I Fund has become increasingly relevant, offering TSP investors exposure to a new benchmark index that reflects the performance of international equities. The fund holds a diversified portfolio of stocks, allowing investors to consider long investments in companies outside the USA, China, and Hong Kong, whereas before the I fund only held investments from specific markets such as Australia, Japan, and Sweden and no emerging markets, which have the most room for growth.
China and Hong Kong were excluded from the new index due to geopolitical concerns, although the mutual fund window can provide exposure to China and Hong Kong with TSP dollars. Despite the switch to a broader index of international funds, few federal employees have adjusted their allocation to include the I fund in their retirement plan.
How Your TSP Account Can Benefit from the TSP I Fund
Investing in the TSP I Fund means participating in a carefully managed investment strategy by the Federal Retirement Thrift Investment Board. The fund also aligns with the investment philosophy of using market index funds, just like the C Fund that tracks the S&P 500 index and the F Fund for fixed income investments.
The gradual shift from the MSCI EAFE Index to the MSCI ACWI IMI ex USA ex China ex Hong Kong Index did not lead to immediately higher returns throughout the course of 2024. Year-to-date, however, the international option has easily outperformed the other stock funds available in the federal retirement savings plan. Including the I Fund in the TSP allocation for investors provides more diversification and higher possible returns when calculating a portfolio’s annualized growth.
Retire with Confidence: How to Properly Invest TSP Funds
Financial professionals play a crucial role in helping TSP investors properly diversify their TSP portfolio, particularly when it comes to the TSP I Fund, which focuses on international stock index investments. By incorporating a mix of TSP funds, including the C Fund and various stock funds, investors can create a balanced investment strategy that allows TSP participants to mitigate risks associated with domestic stocks while potentially increasing returns. A strategic approach not only enhances the growth potential of a TSP account but also aligns with the long-term investment goals of federal employees.
Why Federal Employees are Still Cautious to Move Money into I Fund
As aforementioned, since its inception in 2001 up to 2023, the I Fund has not been the best option for investing internationally as the old index, MSCI EAFE, only allowed exposure to developed countries with less room for growth than emerging markets. Now, the fund invests in a wide array of markets and sectors, making it an attractive choice for those interested in emerging markets and the overall global economy.
The MSCI ACWI IMI ex USA ex China ex Hong Kong Index is a much more diversified benchmark, reflecting the shift towards a more global investment strategy. Despite this, the prior stigma attached to the index is likely leading TSP investors to remain wary of the I fund options. Two decades of performance history of disappointing investment returns seems to still cloud the fund’s reputation.
International Option Has Lowest Participation Rate Among Equity Core Funds
At the end of October, here is how much was invested per fund. This includes the lifecycle funds or L fund, which are designated allocations based on target retirement dates. However, especially as federal workers approach retirement, these funds are often overly conservative and heavily invested in the G Fund.
| Investment | Assets ($) Invested |
| G | $318.8 billion |
| F | $38.8 billion |
| C | $475.5 billion |
| S | $122 billion |
| I | $114.5 billion |
| TSP Mutual Fund Window | $800 million |
| Total Assets in the TSP | $1.07 trillion |
I Fund Controversy Surrounding Changing Investable Market Index
The index for the I Fund was supposed to switch much sooner, back in 2019. However, there was stark opposition by the first Trump presidency and some Senators regarding the inclusion of China.
Deciding ultimately not to include China and Hong Kong, the FRTIB switched to the current index gradually throughout last year.
Help with Including the International Stock Index Investment Fund in Your TSP Allocation
In summary, the TSP I Fund is an essential component of the Thrift Savings Plan for participants looking to enhance their investment options. With its focus on international stock index investments, it provides a pathway to diversify and optimize a TSP account while considering long-term growth potential. This is possible with extensive financial understanding of investments, or with investment advice from a trusted professional.
Learn more about your TSP at a free 1-hour Thrift Savings Plan Webinar.
