TSP Pilot vs. 2030 L Fund

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Overview of the L Funds

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

The TSP PILOT PORTFOLIOS

TSP 2030 L Fund
The TSP website describes the basic initial portfolio structure of their 2030 L Fund. This is considered an "aggressive" portfolio mix, and TSP is currently targeted to those TSP'ers who are expecting to start drawing down their accounts on or before 2030.
The mix is aggressively slanted to the TSP stock funds and closely matches the more typical "75/25" mix lifestyle portfolios available for investors in other 401k plans. Offering a "moderately aggressive" mix of stock and bond funds, the 2030 L Fund might appeal to those investors who are optimistic about the future of the stock market and willing to accept a "moderately aggressive" level of market risk in TSP stock funds to reach retirement goals.
TABLE XXI

TSP Pilot Portfolio vs. TSP L Funds, Timed and Un-timed (1989 - 2010)*

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 5.4% -11.7% 0.1 1.7 1.0

Pilot Timed Income L Fund 5.7% -3.4% 0.5 0.5 0.6

TSP 2020 L Fund 7.8% -40.0% 0.3 10.0 3.2

Pilot Timed 2020 L Fund 8.2% -12.8% 1.2 2.7 1.9

TSP 2030 L Fund 8.4% -45.2% 0.3 12.0 3.7

Pilot Timed 2030 L Fund 8.9% -14.9% 1.1 3.6 2.2

TSP 2040 L Fund 8.9% -50.2% 0.3 14.0 4.2

Pilot Timed 2040 L Fund 9.4% -16.8% 1.0 4.5 2.5

TSP PILOT Standard PORTFOLIO 15.5% -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.
- Charts, listings and data by www.FastTrack.net

You can immediately see how aggressive (and risky) this 2030 L Fund actually is. With only a slight increase in performance over the less aggressive 2020 L Fund you pay for that insignificant added return by suffering a 45% account draw down (Mdd) several times over the 22 year history! Those are very significant draw downs. In fact the market risk is seven times higher than that for it's sister, the Income L Fund, while increasing the performance only slightly.
The TSP Pilot Portfolio, over the same period, provided nearly double the return with less than one-quarter the risk (UI) and only one-fifth the draw down (Mdd) of the 2030 L Fund.
Our basic timed 2030 L Fund alternative improved the return while cutting the market risk exposure by nearly 70%! In fact the long term timed 2030 L Fund risk adjusted performance, as measured by the UPI, was more than three times the performance of the standard 2030 L Fund! Again, professionally timed funds always reduce risk exposure and usually improve return as well--you get more "bang-for-the-buck."

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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. Charts, listings and data by www.FastTrack.net.

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