The Trump administration directed the Federal Retirement Thrift Investment Board, Washington, to halt plans to shift billions of dollars in retirement assets to an index fund that includes Chinese companies.
At issue is a 2017 board decision to shift the $557.3 billion Thrift Savings Plan's I Fund benchmark to the MSCI ACWI ex-U.S. Investible Market index from the MSCI EAFE index. The new index was made up of about 8% Chinese companies, as of Sept. 30, according to an Aon Hewitt Investment Consulting study presented to the board in October. Aon recommended the board switch to the MSCI ACWI ex-U.S. IMI index in 2017 and reiterated that recommendation last fall.
As of Dec. 31, 2018, TSP's I Fund had $40.7 billion in assets.
After calls from Capitol Hill to reverse course, the board in November decided to move forward and plans to make the shift in the second half of 2020.
But pressure on the board, which oversees the TSP, the retirement system for 5.9 million federal employees and members of the uniformed services, has persisted in recent months and have come to a head in light of the COVID-19 pandemic.
Two letters were sent Monday — one from Larry Kudlow, director of the national economic council, and national security adviser Robert O'Brien to Labor Secretary Eugene Scalia and another from Mr. Scalia to Michael D. Kennedy, chairman of the FRTIB, regarding the I Fund shift.
Mr. Kudlow and Mr. O'Brien wrote that the FRTIB is set to implement the shift "during a time of mounting uncertainty concerning China's relations with the rest of the world, including the possibility that future sanctions will result from the culpable actions of the Chinese Government with respect to the global spread of the COVID-19 pandemic. In view of these considerations, we don't believe that proceeding with the investment of the retirement savings of hardworking federal workers in Chinese companies is prudent."