A group that takes a hard line against China sent a petition to Congress and the White House Thursday against a Federal Retirement Thrift Investment Board decision to shift billions of dollars in retirement assets to an index fund that includes Chinese companies.
"We call on President Trump and the Congress to take such steps as are required to prevent the Thrift Savings Plan from being used to finance those corporate instruments of an adversary state that seeks to extinguish our freedoms and everything we hold dear as a nation," said the petition from the Committee on the Present Danger: China.
The Washington-based committee held a news conference that featured a variety of speakers, including Kyle Bass, founder and chief investment officer of Hayman Capital Management, a Dallas-based hedge fund manager, and Secretary of the Navy Richard V. Spencer. The group opposes a 2017 decision by the FRTIB, which administers the $599.5 billion Thrift Savings Plan — the retirement plan for 5.6 million federal employees and members of the uniformed services — to shift TSP's I Fund benchmark to the MSCI ACWI ex-U.S. Investable Market index from the MSCI EAFE index.
At a meeting Wednesday, the board decided to move forward with the I Fund benchmark shift. "We are fiduciaries to 5.6 million people and we have to make the decision that's in the best interest of the greatest number of those people," said Dana K. Bilyeu, a FRTIB board member, at the meeting.
A bipartisan group of senators, led by Marco Rubio, R-Fla., and Jeanne Shaheen, D-N.H., have pressed the board to reverse course in recent months and sent an Oct. 22 letter to Michael Kennedy, chairman of the FRTIB.
"There's no excuse for this decision," Ms. Shaheen said in a statement Wednesday. "This should have been an easy call to reverse course, yet the board has decided to double down on this dangerous proposal. It's reckless to prop up companies that threaten U.S. interests and values, and it's particularly egregious that this is being done with the retirement savings of federal workers, including our military and civilian workforce.
The new index had an exposure of about 8% to Chinese companies as of Sept. 30, according to an Aon Hewitt Investment Consulting study presented to the board last month. Aon recommended the board switch to the MSCI ACWI ex-U.S. IMI index in 2017 and reiterated that recommendation last month.
"America's Main Street investors and government employees should be investing in highly regulated transparent businesses in the United States of America, not coerced by Wall Street to invest in unregulated companies in China," said Christopher Iacovella, CEO of the American Securities Association, Washington, at the Thursday news conference.
A bipartisan group of lawmakers introduced a bill, the Taxpayers and Savers Protection Act, on Nov. 6. The bill would conditionally ban the investment of TSP funds in securities listed on mainland Chinese exchanges. In particular, it would prohibit investment in issuers listed on foreign securities exchanges where the U.S. Public Company Accounting and Oversight Board has not issued an audit inspection and where the PCAOB is prevented from conducting such inspections.
Newt Gingrich, former speaker of the House, in a phone call during the news conference, urged Congress to pass the bill.