Think Tank Blasts TSP Real Estate Fund Proposal

[hellbender]

http://www.govexec.com/story_page.cfm?articleid=34564&dcn=todaysnews

“"If Congress successfully forces a REIT fund on TSP, the balance of power will shift from [the board's] focus on the needs of TSP members to political interests of a particular industry or interest group," said Heritage senior research fellow David John.”

“Representatives of the National Association of Real Estate Investment Trusts, which has been lobbying Congress and the board extensively for the addition of such a fund, said John's paper looked only at the political game and ignored the financial performance of REIT funds.”

 

[unclemick]

heh heh heh heh

Entertainment value - VG REIT Index ballpark - R squared about 11 and SD 14 at ten yrs. Memory says SD numbers pushing 17 at periods longer than a decade.

'slice and dice' anyone?

heh heh heh heh - guilty as charged - I owned some REIT index 1998-2006(till jan) - cause of Bernstein's rolling correlations numbers back in the day. But then again - psst Wellesley - back before I ever heard of Fama and French's 'value premium'. We all just gotta putz - don't we

 

[ats5g]

Here's the article by the Heritage Foundation:

Real Estate Investment Bill Risks Slippery Slope for Thrift Savings Plan

Performance chasing anyone.  If this goes through, it's gonna be hilarious when REITs tank and the congress has egg on their faces.

Nice how Congress is getting around the fiduciaries of the TSP through legislation, eh? That must be a pretty good REIT lobby.

I think the criticism by the Heritage Foundation of the REIT funds being expensive is without merit. Vanguard's Admiral and Inst'l REIT funds are around 0.10%, so I'm pretty sure Barclays would have no problem setting up one for around thar price.

Though, the criticism of more funds confusing participants and leading to performance chasing is pretty good, IMO. I like this quote from Michael Grupe, NAREIT's senior vice president of research and investment affairs:

Grupe also said John's argument that a greater number of funds will confuse investors is weak because most private 401(k) plans offer more than 15 fund options, while the TSP has only five.

yeah, but that doesn't mean that participants aren't confused.

well, at least the people on tsptalk.com will have more crap to sell.

- Alec

 

[Bimmerbill]

I have the majority of my retirement funds in the TSP. I would like them to add a REIT index fund.

More choices are better, IMO. If I want to invest in it, I can. If not, I won't.

Tho I do think they should go thru the proper procedures to get additional funds added.

I always hate the excuse that more funds will confuse people. It insults my intelligence.

 

[astromeria]

If the Heritage Foundation is against it, I'm inclined to suppose it's a good idea In any case, they are hardly unbiased commentators beings how their stated mission is to promote conservative values, not figure out what's best for the majority of Americans.

 

[Scrooge]

If the Heritage Foundation is against it, I'm inclined to suppose it's a good idea

A quick look at the list of sponsors suggests that it's a bipartisan bill. The list includes fairly conservative Republicans like Jim Sensenbrenner, moderate Republicans like Nancy Johnson and all kinds of Democrats up to and including the Democratic Leader Pelosi.

In any case, they are hardly unbiased commentators beings how their stated mission is to promote conservative values, not figure out what's best for the majority of Americans.

Sure, as their Web site states, their "mission is to formulate and promote conservative public policies". Of course, they think that they are doing it in the interests of "the majority of Americans" -- just like liberal think tanks do

 

[ats5g]

I have the majority of my retirement funds in the TSP.  I would like them to add a REIT index fund. 

More choices are better, IMO.  If I want to invest in it, I can.  If not, I won't. 

Tho I do think they should go thru the proper procedures to get additional funds added.

I always hate the excuse that more funds will confuse people.  It insults my intelligence. 

Personally, I'd love to see a REIT Fund.  However, there is research that shows more funds can confuse people.  See Vanguard's Can There Be Too Much Choice In a Retirement Savings Plan?.

An educational compaign [a little better than the one for the L funds] could probably point out to participants the role a REIT fund could/should play in their portfolio.

- Alec

ps - I'd like to see the Ennis Knupp report on possible additional funds for the TSP.

 

[samclem]

I always hate the excuse that more funds will confuse people. It insults my intelligence.

I used to feel the same way. I've got fairly strong libertarian leanings, but now I see some real value in placing some restrictions on the investment options people have. Reasons:
-- The evidence is that most folks are doing a poor job with their 401Ks. They close them and take the money when they change jobs. They invest in ways that result in most folks doing considerably worse than the market averages.
-- When people fail in their investing, we bail them out as a society (publically subsidized services, welfare, aid, etc). As a taxpayer, that makes their failure my business.

Given our national experience with 401Ks, if we ever move to partial privatization of Social Security (a big "IF"), I think it would be very appropriate to limit the types of investments available. The TSP is often held out as a model of a well-run, low-cost program--I'm hoping it won't get loused up with all types of boutique offerings.

 

[Bimmerbill]

I guess I would rather see people educate themselves than see everything "dumbed down" for our own good.

There is too much of that going on. IMO, again.

 

[ats5g]

I guess I would rather see people educate themselves than see everything "dumbed down" for our own good.   

There is too much of that going on.   IMO, again.

I couldn't agree more, Bill.

 

[samclem]

If I weren't afraid our collective backs would break from holding the societal safety net, I'd be all in favor of a wide open environment. But when Grandma gets sold by a broker on puting all of her money into 30 day call options on Styrofoam Lawn Ornaments, Inc, I know we'll all be helping her make ends meet.

 

[unclemick]

We are.

I hear numbers bandied about like 60% of current retiree's couldn't make it without SS and up to 44% of all medical cost is on the the government's(read taxpayer's) nickel.

Whether these SWAG's are accurate I don't know. But handgrenade wise we're talking big bucks.

Yike's - I can hardly wait till all those 'well managed 401k's' etc have to fund retirement.

 

[setab]

I'm in the process of rolling over my TSP so it doesn't really matter to me. I retired in March and don't really like the fact that I can't keep adding to the TSP and can't access it easily. I also don't like having Uncle Sugar having control of all my retirement resources. He has my pension; that's enough.

setab

 

[donheff]

I also don't like having Uncle Sugar having control of all my retirement resources. He has my pension; that's enough.
setab

Uncle Sam doesn't really control your TSP. The Thrift Board is an independant entity. It basically sets up indexes of the sort people on this board regularly tout. The management expenses are as low as you can get. Seems like a great way to invest in mutual funds.

The Heritage complaint is that if the Hill is trying to intervene in Board business. If they start messing with the TSP now, where will the messing end? But their complaint seems overblown. No one is talking about manipulating the individual funds, they are just talking about forcing the TSP to offer a type of fund they might not otherwise offer. That slippery slope may lead to some hedge funds but should have no effect on the various stock and bond funds they already offer. The only danger there is that Feds might get confused but who, other than a Fed, cares about that?

 

[setab]

The board may be "independent" but funds from the G fund have been "borrowed" before to help with short falls. Yes, they are always paid back, but that would not fly anywhere but in the government. Also, the other two problems still exist once you have retired. You can't add to the 401k and getting money out is a pain. My rollover request just got rejected because I didn't provide duplicate information on line 23b that was already provided on line 24. My telephone number was on the request and a simple phone call could have cleared up the problem. Instead, the request was rejected and I have to file it all over again. Ah, bureaucracy at its finest!

setab