The new index notably excludes stocks of mainland China and further excludes stocks on the Hong Kong market, which the prior index reflected. Image: Dennis Diatel/Shutterstock.com
The TSP has said it has completed the transition of its international stock I fund to track a broader index of non-U.S. stocks, likely bringing to an end one of the rare instances in which the TSP became a focal point of political controversy.
Under a decision made by its governing board last year, the fund has been changed to track the MSCI All Country World Investable Market Index ex USA ex China ex Hong Kong (MSCI ACWI IMI ex USA ex China ex Hong Kong) Index, rather than the MSCI Europe, Australasia and Far East (MSCI EAFE) Index. The TSP earlier this year said it would transition to the new fund during the course of this year but did not publicly announce a schedule or completion date.
The prior index reflected the stocks of about 800 large and medium sized companies in 21 developed countries, representing about 55 percent of non-U.S. stock markets. The new index reflects more than 5,000 large, medium and small companies in those same countries plus 23 emerging market countries, representing 90 percent of the non-U.S. markets.
“The new I Fund benchmark index further diversifies I Fund investments and gives TSP participants access to more markets and companies,” an announcement said.
The new index notably excludes stocks of mainland China and further excludes stocks on the Hong Kong market, which the prior index reflected.
That concludes a long-planned broadening of the I fund to reflect stocks of additional countries, as recommended by several studies the TSP had commissioned. In mid-2020 as the TSP began preparing to transition the I fund to track a broader index that did reflect the stocks of China, opposition arose from the then-Trump administration and some congressional Republicans and outside interest groups.
In the wake of that opposition, the TSP set aside that plan until late 2023 when it announced its intention to transition the I fund to the new index now in effect.
The I fund is the second-smallest of the TSP’s five core funds—the bond F fund is smaller—accounting for 9.3 percent of the total on investment, counting its shares in the lifecycle L funds.
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