The U.S. Main Federal Pension Fund is no longer authorized to invest in Chinese enterprises and companies that threaten the country’s national security. American leader Donald Trump made a statement today.
The White House referred to “serious risks of upcoming sanctions” in connection with the coronavirus pandemic.
New instructions from the U.S. administration came at a time when the Federal Pension Investment Board (FRTIB) is actively planning a significant expansion of the international part of the investment portfolio by including the MSCI index, which includes companies from China.
FRTIB manages approximately $600 billion of financial savings under the “Savings Plan” (TSP). It should be specified that this is the world’s largest pension plan with mandatory contributions for American civil servants.
US sanctions and unnecessary risks
A statement was made Thursday by Robert O’Brien, National Security Advisor to the President, and Larry Kudlow, Economic Advisor. They warned that if the MSCI index is used, the country’s pension funds will inevitably face serious and “completely unnecessary risks”. The advisors explained that investments will go to companies in China, which are in question from a national security point of view.
O’Brien and Kudlow also pointed to the likelihood of legal problems – they said they could arise if MSCI entities are subject to further US sanctions.
What are the threats to U.S. civil servants?
The FRTIB leadership has previously refused to listen to similar demands from U.S. senators. The Federal Pension Board has stated, in particular, that due to such a measure at least 5.5 million US civil servants whose savings are managed by the fund will be at a great disadvantage. Today, the pressure is already coming from the White House.
Correspondents of the Financial Times report on a letter that Kudlow and O’Brien sent to Labor Secretary Eugene Scalia. The official is responsible for overseeing the TSP. Mr. Trump’s advisers emphasized that the securities of Chinese companies in the fund’s portfolio were exposed to significant risks.
Representatives of the U.S. administration also did not rule out that the upcoming sanctions restrictions “will be directly related to the fault of the Chinese authorities in the global spread of coronavirus COVID-19, which ended in a pandemic.