The New TSP I Fund
It has been almost a year since the implementation of the new TSP I fund. The fund expands TSP investor exposure from developed markets outside the U.S. to include the majority of emerging markets around the world. Understanding the new I fund is important given the shifting economic and geopolitical landscape in 2025.
In this post we will discuss:
How we got here
How to track the new I fund
Is the new I fund better or worse for TSP investors?
The trend of U.S. vs International market performance
A Brief History
From its inception in May 2001 through September 2024, the TSP I fund tracked the MSCI EAFE Index (Morgan Stanley Capital International, Europe, Australasia, Far East). It is maintained by MSCI Inc., a provider of investment decision support tools.
The index is a widely recognized stock market index that tracks the performance of large- and mid-cap companies across 21 developed markets, excluding the US and Canada. Hong Kong is considered a developed market and is included in the index. China is not included in the index as it is not considered a developed market.
In 2017, the Federal Retirement Thrift Investment Board (FRTIB) decided to transition from the MSCI EAFE Index to the MSCI ACWI IMI ex USA Index. This was an effort to provide more diversification for TSP investors. The MSCI ACWI IMI ex USA Index includes the same developed countries, adds Canada, and adds 24 emerging market countries, including China. The transition to the new I fund was schedule to take effect in June 2020.
"In May of 2020, the first Trump administration intervened via a letter from the Department of Labor, telling the FRTIB to halt the transition. The missive arrived amid mounting trade tensions between the US and China and heightened concerns from some legislators that federal employees’ retirement dollars could be invested in companies linked to China’s People’s Liberation Army.
At a meeting called after the administration’s order, at least one board member said members of the US military and federal workforce should not have to invest in “China and/or any other adversaries.”
Others said law, fiduciary duty, and best practices argued in favor of following the original plan, which was undertaken to improve TSP I Fund’s diversification and risk/reward profile. Ultimately, the board voted to pause the change because the board’s membership was about to change. In November 2023, the current board started switching to a recently built index that excludes China and Hong Kong." - MorningStar.com
This new index is essentially the same as the MSCI ACWI IMI ex USA Index but excludes China and Hong Kong, which account for approximately 10% of the index. The transition from the "Old" I fund to the "New" I fund was completed in September 2024.
Tracking the New I Fund
The MSCI ACWI IMI ex US ex China ex Hong Kong is the index that the I fund now tracks. The goal of the I fund is to mimic the daily performance of the index.
Unfortunately for TSP investors, the MSCI ACWI IMI ex US ex China ex Hong Kong Index is not widely utilized by the financial industry at large. In fact, there are no publicly traded ETFs or Mutual Funds that track this index.
As a result, there is no ticker symbol for the new I fund. TSP investors cannot readily access a price chart for comparison to the other TSP funds. The index is available as a custom benchmark and can be viewed at Yahoo Finance.
Unless and until a ticker symbol is created for the MSCI ACWI IMI ex US ex China ex Hong Kong Index, the closest available approximation is the MSCI ACWI IMI ex USA Index; ticker symbol ACWX.
For some perspective, the chart below shows the ACWX (yellow) vs the new I fund (blue). The disparity between the two comes from the market performance of China and Hong Kong which account for approximately 10% of the ACWX.
New I Fund vs Old I Fund
As TSP investors, we can squabble amongst ourselves as to whether the new I fund is better than the old I fund. The chart below shows the ratio of the ACWX (new I fund approximation) vs the EFA (old I fund).
When the line is trending down, the old I fund is outperforming the new I fund. When the line is trending up, the new I fund is outperforming the old I fund. While the overall trend is old I fund outperformance, the new I fund massively outperformed from 2016 into early 2021.
At this point, the relative performance between the old and new I fund is beside the point. The new I fund is the international fund option now available to TSP investors. What really matters is I fund performance vs the C fund.
The Trend of International vs U.S. Market Performance
The international markets have been a focus of the mainstream financial news media since the beginning of 2025. International markets did outperform the U.S. during the first several months of 2025, leading many analysts to call the end of U.S. market dominance. However, the ratio chart below shows that call MAY be a bit premature.
The chart shows the ratio of the I fund vs the C fund. When the line is trending down, the C fund is outperforming the I fund. When the line is trending up, the I fund is outperforming the C fund. The long-term chart has been in a clear downtrend since 2010.
IF/WHEN the trend reverses, the U.S. will lose market dominance and the I fund will begin long-term outperformance. On a monthly basis, we are not there yet.
Bottom Line
International markets are taking center stage in 2025. Will U.S. financial dominance continue or will emerging markets take more market share? TSP investors have an opportunity to outperform in either scenario.
The new I fund, with significant exposure to emerging markets, gives TSP investors exposure to countries that have outperformed during the first several months of 2025.
If this short-term trend of emerging market outperformance continues, TSP investors may consider reallocating out of the U.S. (C and S funds) and into international markets (I fund).
How will we know when to reallocate more to the I fund? Watch the long-term ratio chart of the I fund relative to the C fund. When that trend turns up, that's your signal to consider the I fund for the long-term.
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GrowMyTSP.com does not provide personal investment advice. We are an education and analysis service, helping TSP investors grow their accounts using strategies and models that best fit their personal circumstances and risk tolerance. Get started at GrowMyTSP.com.
