TSP Board is changing the I Fund's index

[Aitrus]

Source: https://www.fedsmith.com/2023/11/14/frt ... und-index/

Looks like the FRTIB has approved a major change to the I Fund. It's changed the tracked index from the old MSCI EAFE Index to the new "MSCI ACWI IMI ex USA ex China ex Hong Kong index".

By way of comparison, the old MSCI EAFE index invested in 798 large and mid-cap stocks in 21 developed markets (meaning, first- and second-world economies with a long track record outside the US). The new index invests in 5,621 large, mid, and small-cap stocks in 21 and 23 emerging markets (meaning, projected to be up-and-coming economies as well as longtime performers) except for the US, China, and Hong Kong.

Before, the MSCI EAFE was essentially a C Fund equivalent of the world's market outside the US. This was about equal to 55% of the global market outside the US.

Now, it's more like a combination C and S Fund equivalent of the world's market outside the US, China, and Hong Kong. It represents about 90% of the global market outside of the US.

I haven't had time to take a look at the historical performance of this index, but the transition is scheduled to take place in 2024. All of the other Funds will remain as is.

[Bubba]

Aitrus,

You got a step ahead of me! Nice.

I saw this yesterday and have a few thoughts, take them as you please.

First, a quick comparison of both:

New index https://www.msci.com/documents/10199/79 ... g%20China).

Old index https://www.msci.com/documents/10199/82 ... bc9e07b8ba

The backtest doesn't help much...because the new index only has a history of 5 years...so not much to compare.

In reality, the change won't mean that much. Japan and the UK are still the largest components, although not as large as in the EAFE index. Also, since most strategies do not buy into them other than primarily in April, July and December (a bit in March too), not many changes are necessary. Nonetheless, those months tend to be outperforming months for developing countries too. In fact, the developing world tends to really kill it in April, July, October and December. Not a bad place to be during those months. Still, this index isn't entirely only the developing world...so October might not be that hot for this index.

That's just from backtesting the past 20 to 30 years of different indices. Obviously do your own due diligence.

Best,

Bubba

[jimcasada]

Ok, I'm searching on Ameritrade and I see an ACWI for "ISHARES MSCI ACWI ETF." Is this the correct symbol to watch? What does this "ex USA ex China ex Hong Kong" mean? I see this change mentioned in Ravi Deo's letter included with my TSP statement that I received today, but I can see no effective date?

[Aitrus]

"ex USA ex China ex Hong Kong" means it's an index of all the world's stock markets except for the USA, China, and Hong Kong.

An example of how it works: let's say you wanted to create an index of all US stocks with some exceptions (Seattle, Portland, and Vancouver). You would combine everything that's in the C and S Fund (the entire US market), but then melon-scoop out any businesses based in Seattle, Portland, and Vancouver. Whatever is left of the US Stock Market minus those three places would be the makeup of the index.

Now apply that concept worldwide, but exclude all companies based in the USA, China, and Hong Kong. That's going to be the index the new I Fund follows.

As for the symbol on Ameritrade, I'm not sure. It might be a Blackrock proprietary one that was designed specifically for TSP, or it might be one that's widely known. I haven't tried to nail it down yet.

[Bubba]

As for the symbol on Ameritrade, I'm not sure. It might be a Blackrock proprietary one that was designed specifically for TSP, or it might be one that's widely known. I haven't tried to nail it down yet.

I read somewhere (can't find it now) that this index was created just for the TSP. This is part of the reason that they don't have much data. In a presentation that I saw, the index gives a better return over a 20 to 25 year period in comparison to the EAFE index (present I fund). That's for buy-and-hold. I think it was 8% CAGR compared to 9.8% (give or take a couple of %.1s). This begs the question why they don't publish more data (since they apparently have it) and secondly, why aren't there more funds with this index (which I think the answer is because it was created specifically for the TSP). Either way, the long-term piece doesn't help us "intra-monthly changers."

[jimcasada]

For comparison today: $ACWI ETF +.51%, $EFA ETF -.05%, and actual TSP I-fund +.1%

[bamafamily]

The Bogleheads dissected this pretty well least November..
Pretty good info Here

https://www.bogleheads.org/forum/viewtopic.php?t=416712

[Chulke]

So do we have a ticker symbol for the new fund yet?


Cheers!

[23V23C]

So do we have a ticker symbol for the new fund yet?


Cheers!

For now the TSP.gov website is showing the following for tracking the new I Fund:

The current I Fund’s benchmark is the MSCI Europe, Australasia and Far East (MSCI EAFE) Index.

The future I Fund benchmark will be 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.

https://www.msci.com/documents/10199/79 ... 9ff978d508

[Kajsss]

ACWX is very close to what the TSP will be using for the I fund. Not exactly, but the holdings in each are the very similar. But would still like the ticker TSP will be using.

[bloobs]

ACWX is very close to what the TSP will be using for the I fund. Not exactly, but the holdings in each are the very similar. But would still like the ticker TSP will be using.

It better not be. ACWX significantly underperforms ACWI by a wide margin since their inception (March 2018)

[Chulke]

Sooooo....On Yahoo Finance I found this...https://finance.yahoo.com/quote/%5E753692-USD-STRD

Could this be the index the new I fund will try to emulate?


What I don't like about this new change is it's gonna throw ALL the strats off that use I fund....Is anyone over at TSPCalc starting to calculate that change into the strats?

Not a whole lot of historical data to go off of....may have to start looking at strats that forego I fund altogether until it builds some data perhaps?

Anyone have a lead on a good strat that skips I fund a averages 28% with a low Std dev?


Cheers!

[Aitrus]

What do you consider a low Std Dev?

[Chulke]

10 or lower? I suppose...


Edit: Went back and looked at my current strategy...Its at 12ish....so I guess I could do 15 or lower honestly as I do keep an eye on a couple others that are all lower than 15 Std Dev and all have a mean of 25% or more



Cheers!

[Chulke]

and also of note....I was just reviewing the fact sheet on the components of the new I fund and the old I fund....The Top 10 holding are NOT all that different, in fact they are mostly the same...



Cheers!