What are the costs to TSP participants invested in the funds affected by frequent trading activity?
Frequent trading activity results in additional fund trading expenses that are borne by all participants in the fund (not just those who are making interfund transfers), and can negatively impact returns. For example, in 2006, the trading cost for the I Fund was 8 basis points (or 80 cents per $1,000). This means that the impact of frequent trading in the I Fund was more than double the impact from the cost of administering the TSP funds (expense ratio) which was 3 basis points (or 30 cents per $1,000). These costs affect everyone who is invested in the I Fund, not just the frequent traders. The frequent trading is impacting the other funds as well. In addition, there is the possibility of foregone interest in those situations where BGI cannot settle our large trades on a next-day basis. Thus, the changes are designed to protect the interests of all participants in response to the frequent interfund transfers in the F, C, S, I, and L Funds made by a small number of TSP participants.
Frequent trading activity results in additional fund trading expenses that are borne by all participants in the fund (not just those who are making interfund transfers), and can negatively impact returns. For example, in 2007, the transaction cost for the I Fund was 6 basis points (or 60 cents per $1,000). The cost of administering the TSP funds (expense ratio) was 1.5 basis points (or 15 cents per $1,000). This means that the impact of transaction expenses in the I Fund was four times the impact of the cost of administering the TSP funds. These costs affect everyone who is invested in the I Fund. High levels of trading also impacted the other funds. In addition, there is the possibility of foregone interest in those situations where BGI cannot settle our large trades on a next-day basis. Thus, the limits on IFTs are designed to protect the interests of all participants in response to the frequent interfund transfers in the F, C, S, I, and L Funds made by a small number of TSP particip
Related Questions
- What is Fidelity Investments’ frequent trading policy for Select funds, and how does it affect Fidelity Select Fundranker?
- What are the costs to TSP participants invested in the funds affected by frequent trading activity?
- What has been the impact of frequent interfund transfer activity on the TSP Funds?
