TSP Pilot vs. 2010 L Fund

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Overview of the L Funds

The Income Fund
The 2010 L Fund
The 2020 L Fund
The 2030 L Fund
The 2040 L Fund

The TSP PILOT PORTFOLIOS

TSP 2010 L Fund
The TSP website describes the basic initial portfolio structure of their 2010 L Fund. This is their second most conservative L Fund and is currently targeted to those TSP'ers who are expecting to start drawing down their accounts on or before 2010.
The mix is evenly weighted between the TSP bond and stock funds. This portfolio closely matches the more typical "50/50" mix lifestyle portfolios available for investors in other 401k plans. The 2010 L Fund is a balanced portfolio that might be useful for those investors who are either ambivalent about future market performance or opt for a truly balanced portfolio.
TABLE XXI

TSP Pilot Portfolio vs. TSP L Funds, Timed and Un-timed (1989 - 2009)*

Portfolio Annualized Return
(AR)⁵ Maximum Draw-down
(Mdd)¹ Ulcer Performance Index
(UPI)² Ulcer Index
(UI)³ Standard Deviation
(SD)⁴

TSP Income L Fund 5.5% -11.7% 0.2 1.8 1.0

Pilot Timed Income L Fund 5.6% -3.4% 0.5 0.5 0.6

TSP 2010 L Fund 3.2% -31.3% 0.1 7.2 2.4

Pilot Timed 2010 L Fund 7.2% -9.6% 1.1 1.8 1.4

Pilot TSP 2020 L Fund 7.7% -40.0% 0.3 9.9 3.1

Pilot Timed 2020 L Fund 8.1% -12.8% 1.1 2.7 1.8

TSP 2030 L Fund 8.2% -45.2% 0.3 11.9 3.6

Pilot Timed 2030 L Fund 8.7% -14.9% 1.0 3.6 2.1

TSP 2040 L Fund 8.7% -50.2% 0.3 13.9 4.1

Pilot Timed 2040 L Fund 9.3% -16.8% 0.9 4.5 2.4

TSP PILOT Standard PORTFOLIO 15.8% -8.2% 5.8 2.3 2.4

Note: Look for a low UI and Mdd and a high Return and UPI as keys to best performance.
Also see information on our Pilot Aggressive Portfolio.
* Database begins 9/1/1988. Some early periods based on proxies for L and I funds.
** Proxy for I Fund begins 1/25/96.
- The TSP L Funds were introduced in 2005. However, our performance for the L Funds begins on 12/31/88 to provide for a more useful assessment of the L Fund methodology. Fund proxies are used prior to 8/1/05. Actual performance for TSP L funds would be considerably worse than that shown if viewed from the actual L Fund inception date of 8/1/05.

Over the last 21 years this conservative portfolio actually had a greater risk exposure (Mdd of -31.3%) than return, 3.2%. In fact it provided four times the risk exposure, as measured by the UI, as did the safe-harbor Income L Fund. Historically, the additional risk of the 2010 L Fund probably wasn't worth the marginal additional return it carried.
The TSP Pilot Portfolio, over the same period, provided nearly five times the return with less risk UI than the 2010 L Fund. In fact you would have experienced less than one third the account draw down with the TSP Pilot portfolio.
Our basic timed 2010 L Fund alternative improved the return while halving the risk. The long term timed 2010 L Fund risk adjusted performance, as measured by the UPI, was more than double the performance of the standard 2010 L Fund. This example shows the typical advantage professionally timed stock funds have over fixed portfolios like the L Funds during bear markets.

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TSP Pilot is a commercial service not associated in any way with the U.S. Federal government. TSP Pilot does not issue individual investment advice. TSP Pilot publications are prepared for informational and educational purposes only. Past stated hypothetical performance is not an indication of future performance.

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