Federal Retirement Thrift Investment Board (FRTIB) Market Research Report

Background

The Federal Retirement Thrift Investment Board (FRTIB) is an independent agency of the United States government, established in 1986 by the Federal Employees Retirement System Act (FERSA). Its primary mission is to administer the Thrift Savings Plan (TSP), a tax-deferred retirement savings and investment plan for federal employees and members of the uniformed services, including the Ready Reserve. The TSP is a defined contribution plan similar to private sector 401(k) plans and is one of the three components of the Federal Employees Retirement System (FERS). As of December 31, 2023, the TSP managed approximately $845 billion in assets on behalf of 7 million participants, with about 4.1 million actively contributing through payroll deductions. This makes the TSP the largest defined contribution plan globally.

Key Strategic Focus

FRTIB's strategic focus centers on:

Participant-Centric Services: Ensuring that the TSP operates solely in the best interest of its participants and beneficiaries, providing them with efficient and effective retirement savings options.

Investment Management: Overseeing a diverse portfolio of investment funds, including the Government Securities Investment Fund (G Fund), Fixed Income Index Investment Fund (F Fund), Common Stock Index Investment Fund (C Fund), Small Capitalization Stock Index Investment Fund (S Fund), and International Stock Index Investment Fund (I Fund).

Operational Excellence: Continuously improving operational processes to enhance service delivery, maintain compliance with federal regulations, and ensure the security of participant data.

Financials and Funding

FRTIB operates without direct annual appropriations from Congress. Instead, it generates revenue through fees associated with the TSP's investment funds and services. In fiscal year 2024, the agency reported net spending of $57.9 million, accounting for a minimal portion of the overall federal budget. The agency's financial operations are designed to be self-sustaining, with expenses primarily covering administrative costs, investment management fees, and participant services.

Pipeline Development

As a retirement plan administrator, FRTIB does not engage in traditional product development or clinical trials. However, it continually evaluates and updates its investment offerings to meet the evolving needs of its participants. This includes:

Investment Fund Management: Regularly reviewing and selecting fund managers to ensure optimal performance. For instance, in May 2018, FRTIB selected BlackRock Institutional Trust Company, N.A. as the fund manager for its F Fund, which invests in a portfolio of bonds tracking the Bloomberg Barclays U.S. Aggregate Bond Index.

Investment Policy Adjustments: Making strategic decisions to align the TSP's investment portfolio with market conditions and participant interests. In November 2023, FRTIB announced a change in the benchmark for its I Fund to exclude investments in companies in Hong Kong and mainland China, reflecting a strategic shift in investment policy.

Technological Platform and Innovation

FRTIB leverages advanced technological platforms to enhance its services:

Digital Transformation: In November 2020, FRTIB awarded a contract to Accenture Federal Services to modernize its recordkeeping services, aiming to improve the customer experience for TSP participants. This initiative focuses on providing a flexible and secure platform with next-generation capabilities, including electronic signatures and automated processes.

Data Governance and AI: The agency has established a Data Governance Policy to ensure data-driven decision-making that supports participants and beneficiaries. This includes the appointment of a Chief Data and AI Officer to oversee data management and the integration of artificial intelligence in operations.

Leadership Team

FRTIB's leadership comprises:

Michael F. Gerber: Chairman of the Board since 2022, appointed by President Biden. Gerber is a co-founder and advisor at Intrinsic Capital Partners and has served as a state representative and trustee for the State Employee’s Retirement System in Pennsylvania.

Ravindra Deo: Executive Director since 2017. Deo joined FRTIB in 2015 as the Chief Investment Officer and has also served as Acting Chief Operating Officer and Acting Executive Director during his tenure.

Leadership Changes

Michael F. Gerber: Appointed Chairman of the Board in 2022, succeeding Michael Kennedy, who served from 2011 to 2022.

Ravindra Deo: Appointed Executive Director in 2017, succeeding Gregory T. Long, who served from 2007 to 2017.

Competitor Profile

FRTIB operates in the public sector, managing the largest defined contribution retirement plan globally. Its primary competitors are other large public pension funds and retirement plans, such as:

California Public Employees' Retirement System (CalPERS): One of the largest public pension funds in the U.S., managing a diverse portfolio of assets for California public employees.

New York State Common Retirement Fund: Manages assets for New York State and local government employees, offering a range of investment options.

State Teachers Retirement System of Ohio (STRS Ohio): Provides retirement benefits to Ohio's public education employees, managing a substantial investment portfolio.

Strategic Collaborations and Partnerships

FRTIB collaborates with various entities to enhance its services:

Accenture Federal Services: In November 2020, FRTIB awarded a contract to Accenture Federal Services to modernize its recordkeeping services, aiming to improve the customer experience for TSP participants.

BlackRock and State Street Global Advisors (SSGA): Serve as investment managers, custodians, and securities lending agents for the F, C, S, and I Fund accounts, providing expertise in managing the TSP's diverse investment portfolio.

Operational Insights

FRTIB's operational strategy focuses on:

Investment Performance: Regularly reviewing and adjusting investment strategies to ensure optimal returns for participants. For example, in February 2024, FRTIB reported that BlackRock's performance for the F, C, and S Funds was in line with the respective indices, and its performance for the I Fund exceeded the International Index's return by 101 basis points, primarily due to fair value pricing.

Regulatory Compliance: Ensuring adherence to federal regulations and policies governing retirement plans, including the Federal Employees Retirement System Act and the Foundations for Evidence-Based Policy Making Act.

Strategic Opportunities and Future Directions

FRTIB is focused on:

Digital Transformation: Continuing to modernize its technological infrastructure to enhance service delivery and participant engagement.

Investment Strategy Optimization: Evaluating and implementing investment strategies that align with market trends and participant needs, including adjustments to fund benchmarks and investment policies.