I'm a federal employee who is invested in the TSP Lifecycle funds. These funds are a diversified mixture of asset classes, are designed to gradually get more conservative over time, and are a decent option for most types of investors.
Yesterday all TSP participants received notice of "Updated Lifecycle fund allocations" that gave the following vague description:
As a result of changes in long-term capital market assumptions and a review of the Lifecycle fund asset allocations, the TSP has revised the target asset allocations of the Lifecycle funds.
But there was no description as to
how the allocations were changed. Frantic alarm bells start to go off in my head when someone tells me they are changing my asset allocation without my express permission, so I did a little digging in the internet archives for previous versions of the Lifecycle fund allocation pages and compared them to the new allocations in effect as of today.
And what I found? The TSP is moving everyone out of the F fund and into the G fund, meaning out of bonds and into short term treasuries. The equity allocations for the the broad market index, small cap index, and international stock index remain unchanged. They just traded about half of their bond exposure for government securities.
This is a broad market motion, effecting millions of people. The F fund holds a reported 23.6 billion dollars in the retirement accounts of federal employees, about half of which was just instantly liquidated. If I'm doing the math right, it works out to roughly 30% of what the fed is spending on quantitative easing each month.
This decision was apparently made by Mercer Investment Consulting, the private firm that manages the TSP lifecycle funds. I don't know if you should take this as a sign that bonds are going to be a terrible investment for you in the future, but at least one investment company believes that to be true so fervently that they just moved billions of dollars in one day. Or maybe the move is big enough to depress bond prices and inflate securities? Or maybe this is an attempt at market timing, an abandonment of their long term asset allocation strategy? I don't claim to understand the implications, but the move seemed noteworthy to me.