Morningstar Announces Analyst Ratings and Research for Nation’s Largest and Best 529 Plans
Four Plans Each Rated Gold and Silver; Four Rated Negative
CHICAGO — Continuing its longstanding effort to help college savers and financial advisors choose the best 529 college savings plans, Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced new Analyst Ratings, research, and reports for 64 of the nation’s largest 529 college savings plans. Together the plans represent more than 95% of the $162 billion in U.S. 529 plan assets. Of these plans, Morningstar has identified 27 that are likely to outperform their peers on a risk-adjusted basis over a full market cycle.
Morningstar has been analyzing 529 plans for nearly a decade. Now, it is using its qualitative Analyst Ratings scale, assigning medal ratings of Gold, Silver, and Bronze, as well as Neutral and Negative ratings. 529 plans receiving a Gold rating incorporate the industry’s best practices and contain investment choices that are highly regarded by Morningstar analysts. Overall, these plans stand out as best of breed for their ability to help college savers meet their goals. Plans earning Silver or Bronze ratings are also viewed positively by Morningstar analysts, have notable advantages, and are likely to outperform their peers. A Neutral rating indicates plans that are not likely to deliver standout returns, but are also unlikely to significantly underperform. On the other end of the scale, a Negative rating indicates a plan’s investment options have at least one major flaw likely to significantly hinder future performance, in Morningstar’s view.
This year, four plans earned Gold ratings, four plans were rated Silver, 19 plans were rated Bronze, 33 plans were rated Neutral, and four plans received Negative ratings.
Gold medalists, in alphabetical order by state:
• Alaska’s T. Rowe Price College Savings Plan, managed by T. Rowe Price;
• Maryland College Investment Plan, managed by T. Rowe Price;
• Nevada’s The Vanguard 529 Savings Plan, managed by Upromise Investments; and
• Utah Educational Savings Plan, managed by the agency of the same name.
• Arkansas’ iShares 529 Plan, managed by Upromise Investments;
• Michigan’s Education Savings Program, managed by TIAA Tuition Financing;
• Ohio’s College Advantage 529 Savings Plan, managed by Ohio Tuition Trust Authority; and
• Virginia’s CollegeAmerica, managed by American Funds.
Plans that received a Negative Morningstar Analyst Rating:
• Kansas’ Schwab 529 College Savings Plan, managed by American Century Investment Management;
• Minnesota’s College Savings Plan, managed by TIAA Tuition Financing;
• Rhode Island’s CollegeBoundfund (Advisor-sold), managed by AllianceBernstein; and
• Rhode Island’s CollegeFoundfund (Direct-sold), managed by AllianceBernstein.
“Over the past 12 months, we continued to see 529 plans push for lower fees and higher quality investment options, and both of these trends directly benefit college savers,” said Laura Pavlenko Lutton, director, fund of funds research at Morningstar. “Unfortunately, not all plans have jumped on these investor-friendly trends, and in a handful of cases where we found high expenses or poor-quality investments, we gave the plan a Negative rating.”
The Morningstar Analyst Rating for 529 Plans gives those saving for a child’s college education a tool to help comprehensively assess a 529 plan. To determine a plan’s Analyst Rating, Morningstar’s mutual fund analysts consider five factors: the plan’s strategy and investment process; the plan’s risk-adjusted performance; an assessment of the plan’s manager; the stewardship practices of the plan’s administration and parent firm; and whether the plan’s investment options are a good value proposition compared to its peers. Analysts then assign forward-looking ratings of Gold, Silver, Bronze, Neutral, and Negative to each plan.
For a full list of Analyst Ratings for each of the 64 plans, go to: http://global.morningstar.com/529PlanRatingsChart2012. A summary of the ratings is also available in Lutton’s Fund Spy column, available today on Morningstar.com at: http://www.morningstar.com/goto/2012top529. Finally, a fact sheet with more information on the new medalists scale can be found here: http://global.morningstar.com/529RatingsFacts2012.
In addition, individual investors who subscribe to Morningstar.com may use the site’s interactive 529 Plan Center to view the Morningstar Analyst Ratings for 529 college savings plans, accompanying analysis, and data on the plans’ investment options. The research and ratings are also available on Morningstar Office, the company’s global practice and portfolio management platform for independent financial advisors; on Morningstar Advisor Workstation, a web-based modular platform that provides financial advisors with investment planning, client presentation, portfolio analysis, and investment research tools; as well as on Morningstar Direct, a web-based 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 more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 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 more than $186 billion in assets under advisement and management as of June 30, 2012. The company has operations in 27 countries.
Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Morningstar analysts’ current expectations about future events and therefore involve unknown risks and uncertainties that may cause Morningstar’s expectations not to occur or to differ significantly from what was expected. Morningstar does not represent its Analyst Ratings to be guarantees.
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