TSP Pilot vs. the L-Funds

TSP Pilot Portfolio vs. TSP L Funds, Timed and Un-timed (1989 - 2011)*
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 5.2% -11.7% 0.1 1.7 1.0
Pilot Timed Income L Fund 5.1% -5.0% 0.1 1.3 0.9
TSP 2020 L Fund 7.0% -35.3% 0.2 8.3 2.3
Pilot Timed 2020 L Fund 7.8% -12.6% 0.7 4.0 2.1
TSP 2030 L Fund 7.7% -42.4% 0.3 10.7 3.5
Pilot Timed 2030 L Fund 8.8% -13.7% 0.8 4.6 2.4
TSP 2040 L Fund 8.2% -47.5% 0.3 12.7 4.0
Pilot Timed 2040 L Fund 9.6% -17.1% 0.9 5.0 2.7
TSP 2050 L Fund 8.5% -52.4% 0.2 14.9 4.5
Pilot Timed 2050 L Fund 10.1% -17.7% 0.8 6.2 3.0
TSP PILOT Standard PORTFOLIO 14.9% -8.2% 5.6 2.5 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. TSP L Funds portfolio compositions as specified by TSP on 1/12.
** 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.
- Charts, listings and data provided by www.FastTrack.net

In Table XXI we have provided the 22 year results of the new TSP L Funds, assuming the TSP Board had made them available then, using with a series of performance and risk metrics. Included for sake of comparison to each standard TSP L Fund is a very basic, long-term market timing model.

Since the TSP's L Funds were just released in August of 2005, alternative proxy funds were used for this analysis taking the history back to 1988; since the TSP L Funds are comprised of simple and static formulations, the chosen proxy funds would track almost exactly with the TSP's new offerings.

While our L Fund market timing models, provided for example only, are not as sophisticated as the TSP Pilot Portfolios, they do show the important benefit of adding even a very basic, long-term market timing signal to each of these new TSP L Fund portfolios.

In each case a basic, long-term computer timing model applied to each of the L Funds would have increased performance and decreased risk substantially requiring only about one switch per year from the L Fund to the safe-harbor G Fund.

These generic "timed models" show what a major impact market timing can have on performance and risk exposure. For each TSP L Fund you can see that the addition of a very basic timing model would have reduced the market risk (Mdd) by 75%!

Even following such a very basic long-term timing model would have saved TSP investors from the huge losses that would have occurred sitting through the devastating 2000-2003 bear market that began after the bust of the high-tech bubble and again in 2007-2009.

 

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