Interfund Transfer Restrictions Show Effect

Although TSP investors made more than 166,000 interfund transfers in September, that number actually is well below the more than 200,000 transfers made last September, a time of much less anxiety in the financial markets. One reason for the drop likely is the new limits the TSP imposed in the spring, allowing only two transfers per month without restriction, and requiring that any transfers after those two may only move money into the G fund. For calendar year 2007, investors averaged about 200,000 interfund transfers per month, many of them attributable to a small percentage of investors who were trying to time the markets, with active trading, especially in the I fund. For example, last September some $4.7 billion was traded in and out of that fund, compared with $1.2 billion last month. Since the restrictions were imposed, investors had been averaging about 90,000 per month, before the spike in September. October is panning out to be even more active, with 180,000 transfers in the first half of the month alone.