With Russian President Vladimir Putin’s invasion of Ukraine triggering massive sanctions against Russia, it’s only natural to wonder whether any of those sanctions impact retirement funds, given the international nature of institutional investing.
It’s a question likely on the minds of many federal employees and retirees participating in the world’s largest 401k-like plan, the U.S. federal government’s Thrift Savings Plan, which features the popular International (I) Fund.
The good news, as reported this week by government business news daily website Government Executive, is that no TSP money is invested in Russia.
The TSP’s I Fund is based on the MSCI EAFE index, which is made up of investments across 21 developed countries. None of those investments are based in Russia, and TSP spokeswoman Kim Weaver confirmed to Government Executive Wednesday that no TSP funds have any Russian holdings.
And the reason no TSP funds have any Russian holdings can be traced back to former President Donald Trump, urged by Sens. Marco Rubio (R-FL) and Rick Scott (R-FL), squashing the Federal Retirement Thrift Investment Board’s plan back in 2020 to shift the I Fund to a market index that included Chinese investments—as well as Russian investments.
That long and deeply debated proposed move would have transferred billions of dollars in the I Fund to a newer index fund that invests in emerging markets. It was blocked by Republicans at the time because the fund included some Chinese state-owned military and intelligence companies.
The full-court press in 2020 from the Trump Administration to block the investment just weeks before the FRTIB was to transfer I Fund assets to the Morgan Stanley Capital International All Country World Ex-U.S. Investable Market Index came in spite of the fact that the Board had several months earlier reaffirmed its decision to invest in the index despite calls from multiple U.S. Senators—prior to the COVID-19 pandemic—to reconsider.
Any consideration of a new index for the I Fund remains on hold indefinitely.
Trump nominated three new presidentially appointed members of the FRTIB board, and under its updated makeup, the FRTIB has not moved forward with the I Fund change. Weaver told Government Executive any consideration of a new index for the I Fund remains on hold indefinitely.
Even if the TSP had adopted the MSCI All Country World Ex-US Investable Market Index, federal retirement funds likely wouldn’t have stayed invested in Russian companies for long, as the Treasury Department’s Office of Foreign Assets Control rolled out a series of sanctions last week barring Americans from engaging in transactions with different sectors of the Russian economy.
Officials at MSCI have reportedly described the Russian market as “uninvestable” and said they are currently considering cutting Russian investments out of the All World index altogether.
Speaking of the I Fund, it declined 2.61% in February, making its performance so far in 2022 a decline of 6.47% after gaining 11.45% in 2021.
Compared to a year ago, most of the TSP’s individual funds are down except for the G and F funds which are up 0.06 and 0.37 percentage points over the previous year respectively.
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