TSP Responds to Pushback on Mutual Fund Window; Investment in Chinese Firms
The TSP has responded to pushback from some Republicans and interest groups against the potential of money invested through its newly opened mutual fund window being invested in stocks of Chinese companies associated with that country’s military. In sum, it said that all the available mutual funds pass the Treasury Department’s standards for investments and that investors are responsible—and are being given resources—for understanding what they are investing in if they choose to shift money into them.
In letters to the TSP board and in appearances on conservative media outlets, arguments are being raised in much the same way as they were two years ago when the TSP was preparing to expand the international stock I fund. That expansion would have added markets of some two dozen countries to that fund, including China. In response to that pressure, the board at the time indefinitely suspended that idea.
The issue had held up confirmation of four nominees for the board, who were approved by the Senate last week after saying they have no intention of pursing an I fund change that would encompass stocks of Chinese companies. Sen. Marco Rubio, R-Fla., one of the leading voices on the issue, had been holding up those nominations pending that response. Their response dealt only with the funds the TSP itself offers, though, and Rubio and others are making the same arguments regarding funds available through the window.
In a new fact sheet on the window, the TSP addressed the issue by saying (in its words):
* “All the mutual funds on the platform comply with all applicable U.S. laws and regulations, including those promulgated by the Securities and Exchange Commission (SEC) and the Office of Foreign Assets Control (OFAC). The mutual funds on the TSP MFW platform will follow the same rules applicable to any other mutual fund offered in any other public or private retirement plan in the United States.
* “The mutual funds available on the MFW platform have not been reviewed by TSP fiduciaries to determine whether they are wise investments for any individual TSP participant. This means that participants must carefully review the prospectus for each mutual fund and decide which ones will meet their investment goals, as they would if choosing a mutual fund outside the MFW.
* “TSP participants who choose to avail themselves of the MFW will be able to use a Morningstar-developed search tool to find mutual funds that meet their specific investment interests. They will be able, and in fact encouraged, to review any mutual fund’s prospectus before investing to have a thorough understanding of the fund’s goals and investments.
* “The funds that a federal employee or member of the uniform services uses to invest in the TSP or the MFW are personal property, not federal funds. Once a federal employee or member of the uniformed services deposits their paycheck in the bank, it is theirs and not subject to federal control. Money from TSP participants’ paychecks invested in the TSP is exactly the same; it is their personal property and they have property rights under the law.
* “Any federal employee or member of the uniformed services can, and has always been able to, invest in any mutual fund outside of their TSP account through any mutual fund provider.
* “The mutual funds on the platform are subject to the same rules and regs as all other investments. Specifically, to the extent that a comprehensive ban on investing in one or more countries or companies is issued by OFAC, that country or company would be ineligible for trading by any US person, and thereby, eliminated from every U.S. mutual fund. In addition, no U.S. investor could invest in those countries or companies. To the extent any Chinese company’s stock is present in any U.S. person’s portfolio, whether in a SEC registered mutual fund or an individual investor’s account, it is because OFAC has not designated that
company as ineligible.”
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