This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Morningstar Report On 529 College-Savings Plans Shows Rapid Asset Growth, Shrinking Expenses

Stocks in this article: MORN

CHICAGO, April 22, 2013 /PRNewswire/ -- Morningstar, Inc., a leading provider of independent investment research (NASDAQ: MORN), today issued a report on the landscape of 529 college-savings plans in the United States. The report evaluated all 86 U.S. plans, which have more than $166 billion in total assets under management as of Dec. 31, 2012.

"College savers are still showing enthusiasm for 529 plans, and the investments are getting cheaper overall," Laura Pavlenko Lutton, director of fund of funds research for Morningstar, said. "529 investment option returns haven't kept up with similar mutual funds in recent years, though we expect the performance gap to close over the long term because of the tax benefits of 529 options."

Morningstar analysts evaluated the current 529 college-savings plan market by total assets under management, asset flows by category, assets by state, investment process, plan structure, performance, price, management, and other metrics. The report is a companion piece to the Morningstar Analyst Ratings for 529 College-Savings Plans, typically issued in October.

Key findings of the report:

  • Total assets in 529 plans rose 25 percent in 2012.
  • Traditional open-end mutual funds have outperformed 529 plans investment options over the past five years. Age-based 529 options also have trailed their benchmarks. Higher expenses are likely to blame for much of the performance shortfall, as 529 investment options' have extra layers of expenses that can bump their total expense ratio 20 to 30 basis points higher than fees for similar mutual fund offerings.
  • Despite having higher expense ratios than open-end funds, 529 plan investment options have steadily lowered their fees. In all Morningstar 529 categories, average total expense ratios are lower in 2013 than they were in 2011.
  • Direct-sold 529 plans continue to gain market share at the expense of advisor-sold plans, a trend that may reflect the rise of independent, fee-only advisors, who typically aren't paid on commission and may be more likely than an affiliated advisor to direct client assets toward a cheaper direct-sold plan. Also, some direct-sold 529 plans have begun to specifically target RIAs in their marketing campaigns and investment offerings.
  • Conservative allocation investment options have gained the most in new flows among all static portfolios in Morningstar 529 plan categories over the past 12 months, with more than $1 billion in assets added as of Jan. 31, 2013, according to Morningstar's data.
  • Virginia's 529 plans have the most assets under management by a wide margin—more than $37.5 billion. New York's plans, the second-largest, have more than $14 billion in assets under management.
  • "Closed architecture" plans, which include investment options with underlying investments from a single provider, have outperformed "open architecture" plans, which include investment options with underlying investments from a number of providers, on a risk-adjusted basis over the long term. The closed architecture plans also had lower expenses.

Morningstar's 529 plan landscape study is available here: http://global.morningstar.com/529Landscape2013. Additional information and state-by-state comparisons can be found on the Morningstar.com 529 Plan Center at: http://529.morningstar.com/state-map.action.  Morningstar's 529 plan research and data also is available through Morningstar Advisor Workstation and Morningstar Office, its software platforms for financial advisors; and Morningstar Direct, its global investment analysis platform for institutional investors.

About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 416,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 9 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has approximately $149 billion in assets under advisement and management as of Dec. 31, 2012. The company has operations in 27 countries.

The above is for education purposes only; any mention of a specific 529 college-savings plan should not be considered a solicitation by Morningstar.

©2013 Morningstar, Inc. All rights reserved.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs