Quantcast
The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:Going Inside a 529 Program Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, November 19, 2003

Going Inside a 529 Program

by: Sean Hanna, Editor in Chief

Those inside the fund industry have long complained that states are more concerned with profiting from their 529 college savings programs than they are in doing right by investors. Now there is some public proof of the matter.

According to a Wednesday article in USA Today, the paper found after a review of meeting minutes and interviews with board members for the Wisconsin College Savings program that they were more interested in gathering assets for the program than in the woeful investment performance of their funds. The paper also reports that the board was fixated on the $3 million in fees generated by the plan thus far.

That may not come as a surprise to the many fund firms that have been squeezed by 529 programs during the past three years.

The paper delved into the plan's operations because of the brewing scandals at Strong Capital Management, the plan administrator.

It turns out that Strong Capital Management was able to go to the college savings plan board and negotiate a better deal as recently as last April.

At that time Strong proposed what it called a revenue neutral change to its contract that would drop the fees it paid to the state for being able to run the program by $643,137. The new deal also boosted fixed payments to Strong by $307,200. In exchange, Strong reportedly agreed to drop revenues from deferred revenues.

The board was able to agree to the changes because it had built up a $2 million reserve in its fund use to pay for oversight of the program.

The paper also notes that while the plan was able to build its reserve, Strong was charging plan investors more than the targeted fund expense ratio of 100 basis point on one of the funds. It turns out that the Aggressive Portfolio now carries 119 bps. in expenses. Meanwhile, the Moderate Portfolio carries expenses of 102 bps.

Strong and distribution partner American Express claim that they charge the higher fees because the program does not yet generate enough revenue to cover their costs, according to the paper.  

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE

0.0
 Do You Recommend This Story?



GO TO: MFWire
Return to Top
 News Archives
2020: Q4Q3Q2Q1
2019: Q4Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Raw XML
Add to My Yahoo!
follow us in feedly




©All rights reserved to InvestmentWires, Inc. 1997-2020
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use