NASP Examines Minority Access to Nations Largest Thrift Savings Plan

In an ongoing effort to review and improve diversity practices in the financial services industry, the Subcommittee on Federal Workforce, Postal Service and the District of Columbia, chaired by U.S. Rep. Danny Davis, . . .

In an ongoing effort to review and improve diversity practices in the financial services industry, the Subcommittee on Federal Workforce, Postal Service and the District of Columbia, chaired by U.S. Rep. Danny Davis, D-Ill., held a hearing titled "Investing in the Future: Minority Opportunities and the Thrift Savings Plan."

Mark Willis, board chairman of NASP stated, "One of NASP's founding objectives and principles is achieving equal opportunity and participation for minorities and women in the securities industry. We are understandably pleased and encouraged by the subcommittee's efforts to have a dialogue on the practices of the TSP, as the hearing represents an important step if there is to be change and improvement."

The hearings examined the Federal Retirement Thrift Savings Plan (TSP) and sought to improve minority access in its management. As the largest retirement savings and investment plan for federal employees, TSP is also the largest defined contribution plan in the world with more than 3.9 million participants and more than $226 billion in assets as of June 30.

The TSP has only one manager for all of its assets, Barclays Global Investors, a U.S. subsidiary of a foreign bank that has managed the assets of the thrift exclusively for more than 20 years. The demographic makeup of the TSP plan participants, however, is decidedly diverse, with nearly 50 percent of the annuitants being minorities and/or women. No minority- or women-owned firms have managed the assets or executed brokerage services for the TSP in its history.

During the hearing, Thurman White, president and CEO of Progress Investment Management Co. LLC stated that the unilateral management of the TSP is unprecedented in the plan-sponsor community of the United States and is a cause for concern. "Having such a large pool of assets managed by a single manager is very risky. Such single-manager concentration runs contrary to prudent investment policy that typically looks to asset class, as well as manager diversification as an efficient means to diversify risk and enhance returns in today's volatile market."

He further provided examples of U.S. pension plans that have utilized targeted emerging-manager investment strategies to enhance overall investment returns, diversify their portfolios and reduce manager-concentration risk. These examples included CalPERS, CalSTRS, Boeing, GE Asset Management, Illinois Municipal Retirement Fund, LACERS, LACERA, New York State Common Retirement Fund, Shell Oil, Teacher Retirement System of Texas and Verizon Communications. "That the Federal Retirement Thrift Savings Plan is not listed among these plans is shameful and frankly puzzling," he said.