Federal Retirement Thrift Investment Board Executive Director Gary A. Amelio and the other four board members don't support a recently introduced bill to add REITs as a separate investment option to the $152 billion Federal Thrift Savings Plan.
Mr. Amelio today told members of the House Federal Workforce and Agency Organization Subcommittee that the TSP already holds more than $1 billion in REIT investments through two current investment options, the C and the S funds. "As for demand, there's no use adding a fund that no one wants," Mr. Amelio told the lawmakers, explaining that in his nearly two-year tenure as the head of the board, he's received only one letter inquiring about adding a REIT option.
The plan has already hired Mercer Investment Consulting to help it develop asset allocation models for the new lifecycle funds it intends to offer using the existing investment options. Plan officials also intend to hire a consulting firm to conduct a review of investment options and securities lending and risk management controls before taking bids on the investment options when contracts of the current plan providers expire next year.
Adding a new investment option can cost an additional 10% in expenses for plan participants, Mr. Amelio told lawmakers. "I believe that any REIT fund, even if acquired through competitive bidding, could cost the TSP participants many times more than the existing plan menu," he said.
The bill was sponsored by Reps. Jon Porter, R-Nev., subcommittee chairman, and Tom Davis, R-Va., and Chris Van Hollen Jr., D-Md., both subcommittee members.