The Thrift Savings Plan could benefit from new asset classes, according to a third-party report delivered to the plan’s overseers.

Emerging market equities would offer the highest long-term return potential, according to Mercer, a contracted investment firm. Other offerings, such as commodities, global real estate and an international small cap fund, would not drive the same returns on their own. Taken together, however, they could add greater diversity and lower risk to federal employees’ retirement investments, according to the firm’s analysis.

Members of the Federal Retirement Thrift Investment Board met the report with apprehension at a meeting Thursday, saying the infrequency with which emerging markets release information would not provide optimal transparency for TSP participants. The proposal would add the offerings exclusively as elements of the lifecycle funds, and would not include a standalone fund like all of TSP’s current offerings. Officials said this could create confusion for federal employees and retirees, and noted any change would require congressional action.

Still, the political nominees who make up the board instructed the officials who administer the plan to look into emerging markets in the next six months. Bill Jasien, one of the Senate-confirmed members, said FRTIB should not “stick with policies that don’t make sense.”

Greg Long, executive director of the agency, acknowledged despite the drawbacks, there “absolutely is an investment benefit from emerging markets.” Mercer noted the proposed asset classes would have collectively seen 10 percent growth in 2009.

TSP enrollment has trended well in recent months, with the participation rate among workers in the Federal Employees Retirement System at 87 percent, the highest mark in nearly a year. In February, TSP assets exceeded $400 billion for the first time.

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