TSP Funds Struggle to Deliver Good Results in Down Markets

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Last Updated on: 28th December 2020, 10:48 pm

Thrift Savings Plan (TSP) Funds attempt to match the progress of the underlying stock market indices for each fund. It should not come as a great surprise to investors that if the stock markets are down in general, these funds will largely follows suit. In 2015, the stock markets struggled and failed to put in a positive performance, which has led to a poor performance of TSP accounts accross the board…

2015 Performance of the TSP Funds

With the S&P 500 benchmark index down .7% for all of 2015, U.S. stocks notched their worst yearly performance since the Great Recession days of 2008. Most of the TSP funds which are heavily correlated to these stock market indices fared little better. Some of them did worse even. The C Fund managed to buck the trend, but several of the others failed to outperform. The S Fund proved to be the biggest loser in 2015. This fund made up of small cap stocks fell a disappointing -2.92%. Foreign stock investors in the I fund did a little better, but still saw their account values drop. This fund slid by -.51%. Hopes for a TSP Fund Santa Claus rally similarly proved ill founded in 2015. Only the G fund managed a positive December. All of the other Thrift Savings Plan Funds saw declines in what is often the best month of the year for the overall stock markets.

Despite these TSP Fund losses, the C Fund continued its multiple year trend of making positive gains. This S&P 500 index based fund increased by 1.46% for the year. Most, if not all, of these gains came from the paid out dividends that are added back to the fund value. This marked seven years in a row of consecutive gains for this fund since the disaster of 2008 when the C Fund lost nearly 37% of its total value.

Bond and fixed income TSP funds were also positive. Their returns are not based on the stock market, which gives them the opportunity to make money in good and bad markets. The government bond G fund lived up to expectations of a positive return. It yielded 2.04% in what proved to be the best 2015 annual return of all the TSP funds. The Fixed Income F Fund looked lackluster by comparison. Though positive for the year, it returned a more meager .91%.

About the TSP Funds

Each of these TSP Funds has a different index and segment of the market for which it attempts to capture the performance. The G Fund is different from the others in that it has a separate management company than the other funds. L Funds are based on specific time horizons for the fund objectives.

• G Fund – The G Fund proves to be unique in that it is actually managed by the internal government group that oversees the Thrift Savings Plan. This is the Federal Retirement Thrift Investment Board. It is also different from the others because it can not lose money. This is because the G Fund only purchases U.S. government guaranteed Treasury bonds and bills.

• F, C, S, and I Funds – Each of these funds is professionally managed. They are alike in all being index funds. All of these funds have a goal of tracking the performance of the underlying benchmark index. In practice most of them have been more volatile than their indices this past year. It is important to realize that however the economy and markets are performing, all of these funds stay invested in their respective markets.

• F Fund – The F Fund is the Fixed Income Index Investment Fund. It aims to replicate the results of the overall U.S. bond market as measured by the Barclays Capital U.S. Aggregate Bond Index.

• C Fund – The C Fund is named the Common Stock Index Investment Fund. As an S&P 500 Stock Index Fund, its goal is to track the S&P 500 overall performance. The index is comprised of the corporate stocks from 500 medium sized to large American companies.

• S Fund – The S Fund represents the Small Cap Stock Index Investment Fund. Its goal is to mirror a large index comprised of U.S. company stocks that are not featured in the S&P 500 as tracked by the Dow Jones U.S. Completion Total Stock Market Index.

• I Fund – The I Fund is called the International Stock Index Investment Fund. It attempts to deliver similar results as the MSCI EAFE Index. This index holds stocks from Europe, Australia, and the Far East Asia regions.

• L Funds – Another class of these funds are the Lifecycle Funds. These are professionally managed funds which hold an asset allocation mixture of the other five TSP Funds. The L funds are set up with specific time horizons based on when the investors will want to retire. They feature an LIncome, L2020, L2030, L2040, and L2050 fund. Those who are imminent to retire by 2017 would be best served by the LIncome fund. The goal in each of these Life Cycle Funds is to walk the right balance between the appropriate risk and hoped for returns for each fund's retirement horizon.

Who Manages the TSP Funds

Naturally the results of the performance of each of these funds ultimately depend upon who is managing them. In the case of the TSP Funds, the FRTIB Executive Director has selected a well known and respected investment company to handle the F, C, S, and I Funds. The assets are selected, bought, invested, and managed by BlackRock Institutional Trust Company. Even a quality company like BlackRock has a hard time delivering positive results when the benchmarks they are tracking are down for the year.

Get Your Free PDF Report on How to Protect, Diversify and Grow your Thrift Saving Plan (TSP) Now

If you are dissatisfied with your TSP's returns, or worried about the future of the economy, you need to request this free PDF report. It contains some information on TSP retirement accounts, why they are underperforming and how to effectively use precious metals as a way to diversify, protect and grow your savings in difficult/unpredictable economic and geopolitical landscapes.