Q. I am wondering how Lifecycle Funds value are determined. For instance, the L2050 Fund is less expensive than the L2020 Fund and the L2050 is the more aggressive fund meaning it has a higher percentage of C, I and S. I don’t understand how this works. Additionally, I tabulated each of the L funds by taking the percent allocation multiplied by the cost of the fund and it is less expensive for me to allocate the same percentages of any of the L funds (outside of L2050) directly versus the subsequent L fund. For example, as of this [April 24] email a share of L2030 is $32.63, but my calculations show a cost of $30.40 using the same percentages per fund.
A. The TSP staff provides the follow explanation:
“The share prices for all TSP Funds – G, F, C, S, I and the Lifecycle Funds – represent the total holdings (net of accrued administrative expenses) divided by the total number of shares outstanding.
“Generally speaking, the only relationship between the share prices of the Lifecycle Funds and those of their constituents is that a single day’s percentage change in the former is the weighted average of the same day’s percentage changes in the latter. For example, today’s percentage change in the share price of the L Income Fund will be approximately equal to the weighted average of today’s percentage changes of the constituents, using the current allocation (G: 73.31%, F: 5.94%, C: 10.79%, S: 2.70%, I: 7.26%) as the weights. The relationship is approximate due to a lag effect related to the daily rebalancing of the Lifecycle Funds.”
