TSP I fund

[userque]

The MSCI EAFE was down .94% and the dollar was way up against other currencies, which should have compounded the loss and dragged down the I fund even more. Yet, the I fund was only down a little over .6%. Does anybody understand how to track this fund???? We should be provided more info than that it tracks the MSCI EAFE and the US dollar against a basket of currencies. Well, today’s loss seems to contradict that.

IMO:

Simply, the underlying for the I fund continues trading even after EFA closes for the day. The I fund is based upon the underlying, which the EFA also tracks, but it only tracks it while it (EFA) is trading ... obviously.

In the evening, the I fund's price is set based upon that late evening price of the underlying...which can be much different that its price at 4 pm ET--when EFA closed.

This is why the EFA chart is so 'gappy.'

I've previously responded to this in this thread, if you're interested in the details. HTH :

I really wish we had a better way to track the I fund. Nobody can give specifics on how it is tracked other than the MSCI EAFE and USD vs foreign currencies. The MSCI was down almost .62% today but the I fund was up .34%. That must have meant one heck of a down dollar vs the Yen and Euro, but on CNBC it didn’t appear to be the case. I’m beginning to believe it cuts off earlier in the day than the 4:00 for US stocks.

Perhaps this'll help:

Reporting with Fair Value Adjusted Indexes!
Introducing the New MSCI Indexes with IDCo Fair Value Pricing

July 2014

Introduction

Nearly all U.S.-domiciled international equity mutual funds use fair value methodologies to adjust their daily net asset value (NAV). Benchmarks for these funds, on the other hand, typically have been calculated using local closing prices only, resulting in artificial tracking error when comparing a fund’s fair value-adjusted NAV to an index. This tracking error has been difficult to explain to mutual fund clients and impaired comparability between funds and their benchmarks. Arguments calling for constructing indexes incorporating fair value adjustments go back to at least 2002 (Madhavan, 2002, Haddad 2008).

In this Research Bulletin, we examine how the newly launched MSCI Indexes with IDCo Fair Value Pricing help address this issue. We first describe what fair value pricing is, how fair value models work and how mutual funds use them. We then cover considerations for designing an index methodology incorporating fair value adjustments and finally review the tracking error reduction benefits that MSCI Indexes with IDCo Fair Value Pricing offer clients.

What is Fair Value Pricing?

Following the mutual fund market-timing scandals of 2001 and 2002, ...

[More: Please see https://www.dropbox.com/s/cxawm3pywr7f9 ... .pdf?raw=1 for the complete bulletin ]

[Octjan2]

Thanks. That clears it up a little. So, it is basically impossible for us to track since we don’t know the “underlying” until we see the percentage gain/loss later in the evening. I was looking back at the share prices back in 2003 when the I fund was made available. The I fund was actually more per share at that time than both the C and S funds. Over the next 15 years the C and S have exploded in comparison, while the I fund has stagnated many years. The C and S funds are now almost $9 and $12 per share, respectively, more expensive. Does this give some credence as to why we always hear how overvalued US stocks are?

[userque]

Thanks. That clears it up a little. So, it is basically impossible for us to track since we don’t know the “underlying” until we see the percentage gain/loss later in the evening. I was looking back at the share prices back in 2003 when the I fund was made available. The I fund was actually more per share at that time than both the C and S funds. Over the next 15 years the C and S have exploded in comparison, while the I fund has stagnated many years. The C and S funds are now almost $9 and $12 per share, respectively, more expensive. Does this give some credence as to why we always hear how overvalued US stocks are?

More precisely, we know that the underlying is the MSCI EAFE Index--but you and I aren't aware of a vendor providing real-time quotes for it, or for a 'futures' of it. To be fair, I haven't looked. (Also, fyi, that data probably won't be free.)

Does this give some credence as to why we always hear how overvalued US stocks are?

I don't deal with fundamentals too much. I trade rather than buy-and-hodl. If it moves a lot, trade it--regardless of the fundamentals.

But ... stocks can continue up even if some say they're "overvalued."

What does "overvalued" really mean? If people are willing to pay that price, is it over-valued? Rhetorical questions.

My point is that it's all relative. It all depends on how you determine "value." If I can sell something tomorrow for a profit, then it is not overvalued. It has 'profit value' to me--because I can sell it to at least one other person that also thinks it has value, regardless of what CNBC says. Whereas someone else wants to consider the assets, the industry outlook, the management team, the this, the that, and the other; and can then come to the conclusion that the same thing is overvalued.

Ask and answer for yourself: Are you trying to invest in the ~world economy--long term, or make profitable IFT trades each month?

[Octjan2]

I may have cracked the I fund calculations. We all know the closing gain/loss is calculated by dollar strength and the MSCI EAFE (EAF). Today the EAF was down 1.69% and the dollar (DXY) was up .6%. However, the I fund finished down 1.15%. I added the closing prices of the EFA and DXY which came to 2.29. If you take the average of the two (divided 2.29 by 2) it came to 1.145 %. It may be a coincidence but the average equaled the closing loss for the I fund. To verify this I will need to check several more days of closing prices to see if they match up.

[userque]

... Today the EAF was down 1.69% ...

What actual time (including time zone) was it when the EAF was down 1.69%?

[Octjan2]

At the 4:00pm market close Eastern Standard Time
https://finance.yahoo.com/quote/EFA

[userque]

Thanks.

Maybe this'll be of some help in your quest to figure out how they price the I-fund:

https://www.tsp.gov/InvestmentFunds/Fun ... ation.html

Fair Value Pricing
"On some days, the percentage change in the I Fund share price reported by the TSP can be significantly different from the percentage change reported for the MSCI EAFE (Europe, Australasia, Far East) Index, which the I Fund tracks. These differences usually occur when the investment manager finds it necessary to reprice its EAFE Equity Index Fund, in which the TSP invests, to reflect changes occurring after the close of the foreign markets.

This process, known as "fair valuation" or "fair value pricing", occurs when there are U.S. market or currency movements between the time the foreign markets close and 4:00 p.m., Eastern time, when the EAFE Equity Index Fund share prices are determined.

For example, the Far East markets close at 3:00 a.m., Eastern time. If there is a major event afterwards - whether a natural disaster or even a major U.S. market swing that affects the pricing of the stocks in the EAFE Equity Index Fund - without fair value pricing, that event's impact on share pricing would be ignored. That is, the price information from the foreign markets can become "stale", or out of date, by the close of the U.S. markets at 4:00 p.m., Eastern time - a full 13 hours later. On such a day, absent fair value pricing, market timers could buy the I Fund and sell their holdings on the following day in order to benefit from the "stale" pricing. They would accomplish this transaction at the expense of other investors in the fund.

Fair value pricing ensures that traders do not benefit from trading on stale prices. It prevents traders from using events that may have occurred between the close of the foreign market and the close of the U.S. market, which may have affected EAFE Index Fund prices, to achieve an unfair trading and profit advantage at the expense of long-term shareholders."

[Octjan2]

No, unfortunately that info from the TSP website does nothing to help us track the fund and help us to make a more informed decision regarding interfund transfers prior to the 12:00 deadline. I’ll average the 2 closing prices (EAF and DXY) again tomorrow and provide an update.

[userque]

Please do, thanks. Years ago, I heard about a guy that could figure it out to the penny.

No, unfortunately that info from the TSP website does nothing to help us track the fund and help us to make a more informed decision regarding interfund transfers prior to the 12:00 deadline. I’ll average the 2 closing prices (EAF and DXY) again tomorrow and provide an update.

[rcozby]

Back in the good ol' days, e.g. Spring of '16, ebbcharts used to keep a running tally on his Strategy thread that I really enjoyed, especially when it came to making sense of the short-term craziness of the I Fund. He would say things like:

"Official (Mar. 16 2016): C +0.57%; S +0.91%; I +0.77%. A new FV of +1.34% got tacked onto Wednesday's MSCI EAFE loss of -0.57%, due to late market movement to the upside. So on Thursday, the I-funders will carry an FV baggage of -1.34% from the get-go."

I wish I knew how he came up with those numbers; I wrote it off to proprietary wizardry.

What I learned is that the I Fund and EFA will converge toward agreement over time, but in the short term they can vary widely due to currency adjustments and time zone differences.

This site still shows ebbcharts as a professional advisor, but his website has been dead for over a year.

[userque]

I used to chat with him regularly on another site. I never asked him about his FV calculations.

[Octjan2]

If it is based on the closing prices of the EAF and DXY the I fund should finish with a .34% gain today. If not, we are back to the drawing board. EAF was up .78% and dollar was up .1%. I kinda doubt it will be that easy to crack.

[Billionair]

If it is based on the closing prices of the EAF and DXY the I fund should finish with a .34% gain today. If not, we are back to the drawing board. EAF was up .78% and dollar was up .1%. I kinda doubt it will be that easy to crack.

Correct, there was also a drop in the market, so we ended up gaining a small percentage. I don't know the math, but the updates usually hit around 8PM. So although we closed at .78%, the drop in the EAF/DXY, affected the closing price. Luckily, the month overall is really good for the I fund historically. Maybe the President and China will come to terms, and agree to get rid of the tariffs, and the I fund can enjoy a 5-6% boom. We lost 1.20ish% on Wednesday, and barely gained anything back yesterday.