Meet the I fund
The C Fund has long been the favorite investment option for federal employees enrolled in the Thrift Savings Plan, the government's 401k-style retirement plan.
The C Fund tracks the performance of the S&P 500, a popular index that includes stocks of big companies in important industries. The S&P 500, and therefore the C Fund, had returns of investment of between 20 percent and 40 percent from 1995 to 1999. But in 2000, the value of C Fund investments dropped more than 9 percent, a result that sent some risk-averse federal employees running for the G Fund.
The G Fund is the low-return and low-risk TSP option that invests in government securities. It has never posted an annual loss; the G Fund has averaged a 7.23 percent annual return. If you're an investor who thinks the C Fund is too much of a roller coaster for your retirement investments, then wait until you see the new I Fund's past performance.
The I Fund debuts in May as one of two new investment options for TSP participants. The I Fund tracks the Morgan Stanley Europe, Australasia and Far East (EAFE) index, which comprises stocks from 20 developed foreign countries.
The EAFE countries are Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and United Kingdom. (The Vanguard Group offers an explanation of how the EAFE index works online here.
The table below shows that the EAFE index has been historically more volatile than the C Fund.
| Annual Returns | ||
| Year | C Fund | EAFE Index (I Fund) |
| 1988 | 11.84 | 28.27% |
| 1989 | 31.03 | 10.50% |
| 1990 | -3.15 | -23.60% |
| 1991 | 30.77 | 12.20% |
| 1992 | 7.7 | -12.20% |
| 1993 | 10.13 | 32.70% |
| 1994 | 1.33 | 7.80% |
| 1995 | 37.41 | 11.30% |
| 1996 | 22.85 | 6.10% |
| 1997 | 33.17 | 1.60% |
| 1998 | 28.44 | 20.10% |
| 1999 | 20.95 | 26.70% |
| 2000 | -9.14 | -14.20% |
The Federal Retirement Thrift Investment Board, which manages the TSP, explains that the "EAFE index is broadly diversified among countries and industries, so that the effect of poor performance in one stock market or group of companies is reduced. Losses will occur if and as the value of the EAFE index declines in response to changes in overall economic conditions or to increases in the value of the U.S. dollar. EAFE index returns tend to fluctuate more than S&P 500 ... returns."
Financial advisers encourage investors to diversify their portfolios so that a decline in one investment does not hurt all of their retirement savings. In May, federal employees will decide how to spread out their TSP investments among the C, F, G, I and S Funds. Next week, Pay and Benefits Watch will take a closer look at the S Fund.
Track the I and S Funds
Want to keep an eye on the EAFE index and the Wilshire 4500 index (which the S Fund will track)? Look no farther than GovExec.com. Starting today, you can follow daily performance of the two indexes on the TSP Ticker on GovExec.com's home page. You can look up historical performance for the EAFE index at mscidata.com and for the Wilshire 4500 at wilshire.com.
Patent Pay Raise
On Jan. 8, GovExec.com reported that the Patent and Trademark Office agreed to a 10 percent to 15 percent pay raise for patent examiners and managers. The agreement requires Office of Personnel Management approval, which typically takes six to eight weeks in similar cases.
But it may take longer in the patent examiners' case. OPM officials have asked the Patent Office for more data about recruitment and retention in a number of patent specialty areas. OPM officials will have to analyze that data before they make a decision on whether to grant the Patent Office's request.
Can We Talk?
The next time your office hires a new employee (which may be a while if you're operating under the hiring freeze), check with your human resources office about a new 22-minute video called "Let's Talk Benefits." The video describes the initial decisions employees have to make about health insurance, life insurance, retirement and Thrift Saving Plan benefits.
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