TSP's I Fund brings 'true diversification' to portfolio

Monday - 11/28/2011, 7:06pm EST

Tom Trabucco, director of external affairs, Federal Thrift Investment Board

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By Jack Moore
Federal News Radio

Your Thrift Savings Plan is probably home to the G Fund and maybe the C Fund as well. But there's more to the TSP than just those two funds.

Tom Trabucco, the director of external affairs at the Federal Retirement Thrift Investment Board, which oversees the TSP, joined In Depth with Francis Rose to demystify the I Fund.

While the S and the C Funds cover the domestic stock market, the I Fund covers developed markets outside the United States. Specifically, the I Fund aims to match the performance of the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index, Trabucco said.

And it may be more familiar to investors because "it really has some differentiation in it," he said.

Risk to investors comes from both market changes and from increases in the value of the U.S. dollar. In other words, investors in the I Fund are "essentially betting against the strong dollar," Trabucco said.

The I Fund is the fifth largest fund — after the G, C, S and F Funds — with about $16 billion invested, he said.

The I Fund "gives you real, true diversification," Trabucco said. The C and the S Fund, because both cover the domestic market, tend to move together, he said. "But the I Fund, being an international fund, is distant from that."

Over the past year, all the funds had positive returns except for the I Fund, he said. This shows that the I Fund moves in different directions and at different times than other funds.

"It dances to a different drummer out there," he added.

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