US retirement fund okays China investment amid threat

Bloomberg

The board that oversees retirement savings for US government employees will allow one of its funds to invest in an international index that includes Chinese companies, despite the threat of legislation from lawmakers who say the investments will undermine national security and contribute to China’s economic and corporate growth.
The Federal Thrift Retirement Investment Board finalised the decision in its meeting and informed the Senate sponsors of a bill that would ban such investments.
The board said a review by an outside investment consultant concluded that the move would be in the best interests of plan participants.
“Investing in emerging markets is not only legal but is the overwhelming choice of fiduciaries across industries and the choice of individual Americans,” Michael Kennedy, the FTRIB chairman, wrote in a letter to the senators.
“The board is fulfilling its role as fiduciary of a retirement plan.”
Marco Rubio, the bill’s lead sponsor, condemned the decision as “unconscionable” and said it would direct the retirement savings of military service members and federal employees to the Chinese Communist Party. He vowed legislative action on the issue and said the board’s “refusal to act in the best interests of the United States will not go without consequence.”
Rubio introduced the Taxpayers and Savers Protection Act last week along with a bipartisan group of senators including Jeanne Shaheen, Mitt Romney, Kirsten Gillibrand, Josh Hawley and Rick Scott.
The bill has the same initials as the Thrift Savings Plan, which functions like a 401k for federal workers and military personnel.
“There’s no excuse for this decision,” said Shaheen, a New Hampshire Democrat. “This should have been an easy call to reverse course, yet the Board has decided to double down on this dangerous proposal.”
In his letter to senators, Michael Kennedy said its investment consultant found that many US companies and public pension funds allow access to emerging markets through non-US equity benchmarks, and he
defended the board’s decision to allow its $50 billion TSP I Fund to mirror an index that invests in emerging markets, including China.