TSP Dog? Which TSP Fund Has Highest Returns in 2025 and Why?

Everyone’s watching the usual TSP stars, but the real action is with the underdog. Meet the I Fund: the quiet TSP dog making noise

I Fund TSP Dog Among Investors

The Thrift Savings Plan (TSP) funds are having a good year. While the number of investors in the I Fund is relatively small, this fund has, by far, had the best year of any other TSP Fund.

The I Fund is up 22.14% in 2025 as of this writing. The TSP Fund in second place is the L 2070 Fund, which has a return of 14.04%.

For comparison, the I Fund now has 4.3% of participants’ share of investments. The S Fund has an 8.8% share, the C Fund has a 34.9% share, and the G Fund has a 24.3% share. The only TSP Fund with a smaller share of participants’ allocation is the F Fund, which has 4.3% of allocated funds by investors.

This means that a big majority of TSP investors have missed out on the superlative run of the I Fund this year.

What Is Behind the Unusual Returns of I Fund in 2025?

There are a few reasons why the I Fund is outperforming the other TSP Stock Funds in 2025. Here is a quick rundown of why this is happening.

Strong Recovery in International Markets

International equities have decisively rebounded this year. The I Fund is the international investment option for the TSP, as this index represents the stocks of large, medium, and small companies in more than 40 developed and emerging market countries, excluding the United States. The I Fund benchmark is the International Stock Index Investment Fund.

In other words, when foreign stocks do better, the I Fund is likely to outperform stocks in the United States.

Lower Popularity = Missed Gains

Many (most) TSP participants have held back from international investing. As noted in a FedSmith article last April, only 3.3% of TSP assets were allocated to the I Fund. While this percentage has gone up in later months this year, the number of TSP investors displaying confidence in international investing is still low.

Broader Geographic Exposure

The I Fund has expanded its exposure to new markets. The I Fund transitioned from exclusively owning non-US stocks in developed markets to adding emerging-markets companies to its investment portfolio. It went from owning about 750 companies in 21 countries to more than 5,500 companies in 44 countries.

The TSP I Fund changed its benchmark index by the end of 2024. Starting in late 2024, the I Fund expanded its benchmark to include more countries and asset classes—shifting from its former MSCI EAFE index to include broader global indices.

This diversification gave the I Fund exposure to markets that have performed well in 2025.

Currency Effects

The I Fund holds unhedged international equities, meaning that fluctuations in the U.S. dollar affect returns. If the dollar weakened over the period, it would have amplified gains in U.S.-dollar terms from foreign equities.

What Is the Long-Term Impact of 2025 I Fund Returns on TSP Investors?

Will the 2025 returns impact the investment allocations of TSP investors? In other words, will TSP investors start investing more of their money in international stock funds instead of U.S. stock funds?

No one knows how investors will react. We do know that since the Fund has changed its benchmark index, an increasing number of investors have begun putting their investment dollars into the I Fund. If the I Fund finishes the year with this spectacular difference, it will impact investment practices, just as investment choices have changed between the C and G Funds over time.

In 2009, about 50% of TSP assets were in the G Fund, while the C Fund held under 25%. As of the end of May 2024, the C Fund had 34.3% of participant allocations in the TSP. At that time, the G Fund was down to 25.7%.

In 2025, as of July 31st, the G Fund has 24.3% of participant allocations, the C Fund has 34.9%, and the I Fund has 4.3%.

Over time, TSP participants change, often in response to market trends. When these changes are made, those who are following the trends may actually hurt their investment returns if they are too late to the party and switch late in the most current trends. Predicting the future is very difficult!

Congratulations to those TSP investors with the foresight to expand into their international investments before this rapid increase in the I Fund’s value!

Monthly Report from TSP

According to the latest monthly report from the TSP, overall participant satisfaction with their service is up to 94.27%, and use of the TSP mobile app continues to increase.