CCP Firms Still Present in Federal Thrift Savings Plan’s Mutual Fund Window
WASHINGTON — The Coalition for a Prosperous America (CPA) today applauded the unanimous decision, as reported by the Financial Times, by the Federal Retirement Thrift Investment Board’s (FRTIB), which manages the federal government’s Thrift Savings Plan (TSP), to exclude Chinese and Hong Kong stocks from its International Fund (I Fund). The TSP is the world’s largest retirement fund with more than $770 billion in assets.
The FRTIB’s unanimous vote is a reversal from an earlier decision to invest the TSP’s I Fund in an MSCI index that contained state-sponsored Chinese companies directly aiding the Chinese Communist Party (CCP). This decision should force all U.S. funds to address the unacceptable risk of investing in CCP companies, including state pension funds, labor union pension funds, and university endowments.
CPA has long-called for the FRTIB to prevent federal retirement funds from flowing to China. While the decision to exclude Chinese and Hong Kong companies from the I Fund is a positive step, the FRTIB’s inaction over its Mutual Fund Window still poses a serious risk to TSP account holders, which includes all federal employees and members of the U.S. Armed Forces. The Mutual Fund Window, which is administered and accessed through the TSP website, allows TSP participants to invest in more than 5,000 different funds, including 22 that are China-only funds.
According to data published by CPA, and that was reported on by The Wall Street Journal and Newsweek, the TSP has serious exposure to companies owned or controlled by the CCP via its Mutual Fund Window. As such, “[m]illions of federal employees can invest in Chinese companies sanctioned by the U.S. government via its flagship retirement plan, even though these companies have been branded a danger to national security or are accused of profiting from forced labor or other human rights abuses.”
Shockingly, the FRTIB admitted publicly that it has not conducted any due diligence to evaluate whether the TSP and the products it offers in its Mutual Fund Window include hundreds, if not thousands, of Chinese-owned entities.
“The removal of all Chinese and Hong Kong-based companies from the I Fund of the federal Thrift Savings Plan sends a clear message to Wall Street, state pension systems and many others that the inordinate risks to investors, our national security and human rights policies require the exclusion of these securities,” observed Roger Robinson, former Chairman of the Congressional US-China Economic and Security Review Commission. “While this decision was scandalously long overdue, the FRTIB’s inaction over its Mutual Fund Window is shameful and contradicts their unanimous decision on the I Fund — inaction that is cynically designed to protect China-related Wall Street fees.”
“This move by the FRTIB is long overdue to ensure that federal retirement funds in the Thrift Savings Plan’s I Fund are not invested in CCP companies that are directly aiding and abetting Beijing’s military modernization, surveillance state, and other malign activities,” said Zach Mottl, Chairman of CPA. “However, the FRTIB must follow up this positive step and address the fact that the Mutual Fund Window has serious exposure to malign CCP companies. Additionally, Congress must pass legislation that would prohibit any funds in the Thrift Savings Plan from being invested in America’s greatest adversary.”
Earlier this year, CPA applauded the reintroduction of the Taxpayers and Savers Protection (TSP) Act, bipartisan, bicameral legislation that would ban the FRTIB from investing retirement funds in the TSP in China. U.S. Senators Marco Rubio (R-FL), Rick Scott (R-FL), Joni Ernst (R-IA), Josh Hawley (R-MO) and Jeanne Shaheen (D-NH) reintroduced the TSP Act in the Senate. U.S. Representatives Michael Waltz (R-FL), Chrissy Houlahan (D-PA), John Rutherford (R-FL), Elise Stefanik (R-NY), Mike Gallagher (R-WI), and August Pfluger (R-TX) introduced the bill in the House.
Last month, CPA released a new “case study” report to Congress that details the alarming extent to which U.S. asset managers and index providers are actively funneling billions of dollars of U.S. investor capital to Chinese Communist Party (CCP) companies, including Chinese firms that have been sanctioned by the U.S. government for human rights abuses and that are helping to modernize China’s People’s Liberation Army (PLA).
The report, titled “Case Study for Congress: Vanguard & FTSE Russell – How Wall Street Funds the CCP & PLA with U.S. Investor Capital,” provides analytic evidence that Vanguard, which has roughly $8 trillion in global assets under management, is investing the retirement and investment dollars of the American people in bad actor Chinese “A-Share” companies at a level unmatched in the U.S. As first reported by the Financial Times, “Vanguard, the world’s second-largest asset manager, is acting as a pipeline through which US investment dollars are being funneled into Chinese military companies and corporations sanctioned over human rights abuses.”