Federal Savings Plan Delays Move to Index With Chinese Stock
Federal Savings Plan Delays Transfer to Fund With Chinese Stocks
(Bloomberg) -- The board overseeing a retirement-savings plan for federal workers is deferring a change in the benchmark index it uses for its international fund to a gauge that includes Chinese stocks.
The Federal Retirement Thrift Investment Board was under pressure from the Trump administration and some lawmakers in Congress to delay the move.
“Due to a meaningfully different economic environment related in large part to the impact of the global Covid-19 pandemic, as well as the nomination of three new FRTIB board members, pending further study, the FRTIB board is delaying the implementation of the I Fund benchmark change to the MSCI ACWI ex-U.S. Investible Market index from the MSCI EAFE index,” the board said in a statement Wednesday.
The Thrift Savings Plan was scheduled to transfer roughly $50 billion of its international fund to mirror an MSCI All Country World Index, which captures emerging markets including China.
Florida Senator Marco Rubio, who last year introduced legislation to stop the transfer, applauded the move.
“While it should never have taken the FRTIB this long to reverse their misguided, deeply flawed decision to invest federal retirement savings in opaque Chinese firms engaged in human-rights abuses and a wide range of military-related activities, I appreciate the board halting this action,” Rubio said in a statement. “I will continue to work with my colleagues to pass legislation that would ban the board from moving forward with this type of action in the future.”
The decision follows pressure by President Donald Trump and his advisers who earlier this week wrote to the board’s chairman to request it stop the move into Chinese equities.
Labor Secretary Eugene Scalia -- at the direction of National Security Adviser Robert O’Brien and economic adviser Larry Kudlow -- on Monday sent a letter to Michael Kennedy, the chairman of the board, telling him to “halt all steps” associated with putting government employees’ money in a fund that includes stakes in Chinese companies.
O’Brien said Tuesday the decision to block the investments stemmed from security and investor concerns.
“There’s a security angle here,” he said in an interview on Fox Business Network. He said about $5 billion of the fund would have been invested in Chinese firms. “A number of the companies they were going to be invested in were Chinese military companies or surveillance state companies. We thought that was risky for U.S. national security, but we also thought it was risky for the investors,” he said.
O’Brien said the administration did not want to potentially fund aircraft manufacturers who do work for the Chinese military or surveillance firms that support what he called “concentration camps” for Uighur Muslims, an oppressed group in China. He also cited telecommunications firm ZTE Corp. as a company the U.S. does not want to support. “So it just wasn’t a good situation for us,” he said.
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