Mike Causey

The R-Fund Rides Again!

The R-fund, as in real estate investment trust fund, rides again. A year ago many people were pushing for an R-fund option to the TSP. Since the housing market ...

Federal News Network Staff

March 26, 2008 4:00 am

3 min read

A year ago, a vocal group of investors, industry lobbyists and influential politicians were demanding that the government add a REIT (real estate investment trust) option to choices offered by the Thrift Savings Plan.

The TSP offers federal, military and retiree investors a large cap fund, mid-small cap fund, an international index fund, a bond fund, a unique-to-feds treasury securities fund and five self-adjusting targeted funds. But for some investors, that isn’t enough. They would like to invest some or all of their money in higher-risk/higher-reward choices. Like gold futures or emu ranching

At the time of the last R-fund push, REITs were hot. They had posted double digit returns year-after-year. But that was then. This is now.

Although REITs are primarily (sometimes exclusively) commercial real estate, the slump in the private homeowner market has had an impact on REITs in general.

The Federal Retirement Thrift Investment Board considered, then rejected, setting up a separate R-fund. It said that 8 percent of the investments in the S-fund (small cap) were in commercial real estate and that 1 percent of the C-fund (S&P 500 index) was in real estate.

The TSP managers have in past opposed what they considered to be funds targeted at a specific item or industry. Because of that they gave a thumbs down to the R-fund, to a proposed Gold fund, and (before the dot-com meltdown) a fund invested exclusively in the dot-com industry.

Ironically, now that the real estate market is in the, uh, tank, this would probably be a good time for long-term investors to get into REITs. Pro-REIT lobbyists and politicians are aware of this. They hope to attach piggyback language, authorizing an R-fund for the TSP, to any federal employee language that has a chance of passage this year. Look for out-going Rep. Tom Davis (R-Va.) to lead the legislative charge.

Investing & Fees

The TSP has the lowest administrative fees in the mutual fund business. They are less than half of what Vanguard (the industry leader in low-fee funds) charges its investors.

Leave The TSP

A number of mutual funds are very, very anxious to get feds to switch from the TSP, to their fund, when they retire. They’ve been spending pots of money advertising their products and warning that TSP accounts could dry up because they are not professionally managed.

Today at 10 a.m. EST on Your Turn with Mike Causey, Francis Rose and I will talk with Alan “Dare to be Dull” Roth about investing in the TSP. He will also touch on the pros and cons of moving your TSP account into an IRA when you retire. And how (and why) to diversify your TSP investments. That’s 10 a.m. on the www.federalnewsradio.com or at AM 1050.

Got a question or comment you want us to pass on to Alan? You can call in (if the boss will let you) or e-mail me at: mcausey@federalnewsradio.com.

Nearly Useless Factoid

According to the National Restaurant Association, August is the most popular month to eat out and Saturday is the most popular day of the week for dining out. Proving once and for all, when we can’t stand the heat, we get out of the kitchen.

To reach me: mcausey@federalnewsradio.com