The Thrift Savings Plan's lifecycle funds topped 700,000 participants in June for the first time in their five-year history.

The L Funds — mixtures of TSP's five underlying funds that are automatically adjusted based on how far an investor is from retirement — have steadily grown since they were introduced in 2005. But participation dropped several times during the market crash and recession in late 2008 and early 2009, as many TSP investors sought shelter in the low-risk, low-reward G Fund. Investors have gradually shifted money back into the stock-based funds over the last year as confidence in the markets returned, and the record-breaking growth in L Fund participation is a sign that confidence is continuing.

In June, 702,440 people had at least some money in the L Funds. But only 193,850 participants had their entire account balance invested in one lifecycle fund, as the Federal Retirement Thrift Investment Board recommends.

Chief Investment Officer Tracey Ray told the board at its July 19 meeting that the growth occurred despite poor stock fund performance in June that dragged all five L Funds down. The C Fund dropped by 5.24 percent, the S Fund dropped 6.9 percent and the I Fund's international stocks dropped 1.75 percent.

While the stock funds did well for much of June, signs of an economic slowdown in China and concerns about the European banking system dragged markets down late in the month.

"We had a pretty bad month in May, and June started strong," Ray said. "It's hard to remember because it turned so ugly at the end, but through June 18 the S&P 500 was actually up 2½ percent [before] the big reversal."

The stock market decline helped bring overall fund balances down from more than $249 billion in May to $246 billion in June. Overall TSP participation increased by 15,000 to more than 4.3 million.

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