(Adds details, quotes from Rubio, FRTIB response)
By Lawrence Delevingne and John McCrank
Oct 22 (Reuters) - A bipartisan group of U.S. senators on Tuesday again asked a federal retirement fund to reverse a decision to track a popular index provided by MSCI Inc, saying a failure to act would lead to U.S. pension savings being funneled to companies controlled by the Chinese government.
The request is the latest effort by Republican Senator Marco Rubio, and Jeanne Shaheen, a Democrat, to stem U.S. investment in specific Chinese companies and it included signatures from other lawmakers, including Senator Mitt Romney, indicating the issue is gaining traction.
It also comes amid heightened U.S.-China trade tensions, as the U.S. government considers limiting the flow of U.S. capital to Chinese companies due to security concerns about their activities, Reuters has reported.
"If implemented, the decision will effectively use these retirement savings to fund the Chinese government and Communist Party's efforts to undermine U.S. economic and national security," Rubio said a statement accompanying a letter to the Federal Retirement Thrift Investment Board (FRTIB.)
The letter was also signed by Republican senators Romney, Josh Hawley, and Rick Scott, as well as Democratic Senator Kirsten Gillibrand.
The letter was the second from Rubio and Shaheen outlining concerns about specific companies included in the MSCI All Country World ex-U.S. Investable Market Index, which the Thrift Savings Plan's (TSP) International Stock Fund is set to begin tracking.
These companies "assist in the Chinese government's military activities, espionage, and human rights abuses, as well as many other Chinese companies that lack basic financial transparency," the letter said.
FRTIB spokeswoman Kim Weaver told Reuters both letters had been received and that "we are continuing to review the matter."
The latest letter ratchets up the pressure ahead of an Oct. 28 FRTIB meeting where the matter is expected to be discussed.
The TSP is a retirement savings plan, similar to a 401(k) plan, for federal employees and members of the military. As of July 2019, TSP assets totaled around $599.5 billion.
MSCI, which is one of the world's largest index providers, with trillions of dollars tracking its benchmarks, did not immediately respond to requests for comment.
It, along with other index providers, like FTSE Russell and S&P Dow Jones Indexes, has in recent years increased the weighting of Chinese-listed companies in some of its indexes as China's economy has opened more, following consultations with large asset managers eager to invest in the country.
New York-based MSCI had earlier responded to Rubio's criticisms in a letter dated June 28 seen by Reuters.
"Currently there is no U.S. law or regulation that prohibits an index company from creating an index containing China A securities or U.S. investors from trading in the China A market," MSCI's Chief Executive Officer, Henry Fernandez, said, referring to China-listed stocks.
Fernandez said indexes are simply measures of markets' performances and that investors can use that information as they like. MSCI does not manage any funds, he added.
Rubio said MSCI failed to adequately address his concerns.
Companies highlighted in the FRTIB letter included the Aviation Industry Corporation of China and China Unicom, which supply military aircraft and telecommunications support to militarized artificial islands in the South China Sea; Hangzhou Hikvision Digital Technology , which was recently added to the U.S. Department of Commerce's Entity List; and ZTE Corporation, which was fined last year for violating U.S. sanctions laws.
Rick Redding, who leads The Index Industry Association, declined to comment. (Reporting by John McCrank; Editing by Chizu Nomiyama and Andrea Ricci)