Analysts identify 29 plans likely to outperform their peers on a risk-adjusted basis
CHICAGO, Oct. 21, 2014-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. The plans together represent approximately 95% of the more than $214 billion in U.S. 529 plan assets as of Sept. 30, 2014, an 18% increase compared with assets under management of $181 billion as of Sept. 30, 2013. Morningstar has identified 29 plans that are likely to outperform their peers on a risk-adjusted basis over the long term.
Morningstar's qualitative Analyst Rating scale includes Medalist ratings of Gold, Silver, and Bronze, as well as Neutral and Negative ratings. This year, Morningstar analysts awarded four Gold ratings, four Silver ratings, 21 Bronze ratings, 32 Neutral ratings, and three Negative ratings. Morningstar upgraded five plans and downgraded 10.
Gold medalists, in alphabetical order by state:
• Alaska's T. Rowe Price College Savings Plan, managed by T. Rowe Price Associates;
• Maryland College Investment Plan, managed by T. Rowe Price Associates;
• Nevada's Vanguard 529 College Savings Plan, managed by Ascensus; and
• Utah Educational Savings Plan, managed by the agency of the same name.
• Michigan Education Savings Program, managed by TIAA Tuition Financing, Inc.;
• Ohio's CollegeAdvantage 529 Savings Plan, managed by Ohio Tuition Trust Authority;
• Virginia's CollegeAmerica, managed by American Funds; and
• Virginia529 inVEST, managed by Virginia College Savings Plan.
Negative Morningstar Analyst Ratings:
• Arizona's Ivy Funds InvestEd 529 Plan, managed by Waddell and Reed;
• Kansas' Schwab 529 College Savings Plan, managed by American Century Investment Management; and
• South Dakota's CollegeAccess 529, managed by Allianz Global Investors.
529 plans receiving a Gold Analyst 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 Medalist 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.
"The 529 industry continues to grow impressively as families seek ways to make the ever-increasing cost of higher education more affordable," Kathryn Spica, Morningstar senior analyst, said. "This year, Morningstar upgraded five plans and downgraded 10, compared with seven upgrades and one downgrade in 2013. Although we downgraded more plans this year, a number of plans improved by lowering expenses or increasing the quality of their investment lineup. In cases where we downgraded plans, their investment options had deteriorated or were unproven."
The Morningstar Analyst Rating for 529 Plans gives investors saving for a child's college education a tool to help comprehensively assess a 529 plan. To determine a plan's rating, Morningstar analysts consider five factors: the plan's strategy and investment process; the plan's risk-adjusted performance; an assessment of the plan's investment managers; the stewardship practices of the plan's administration and parent firm; and whether the plan's investment options are a good value proposition compared with its peers. Analysts then assign forward-looking ratings of Gold, Silver, Bronze, Neutral, or Negative to each plan.
To view the full list of Analyst Ratings for each of the 64 plans, visit http://mscomm.morningstar.com/529ratings. A summary of the ratings is also available in Spica's Fund Spy column, available today on Morningstar.com® along with other featured content focused on saving for college at www.morningstar.com/goto/2014top529. Visit http://global.morningstar.com/529Methodology for a fact sheet with more information about the Analyst Rating scale for 529 plans. In May, Morningstar published its annual landscape study of U.S. 529 college-savings plans, a companion piece to the ratings.
Spica will also host a webinar to discuss this year's ratings at 10 a.m. CT on Nov. 4; to attend, please register here.
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 in Morningstar® Advisor WorkstationSM, Morningstar OfficeSM, and Morningstar DirectSM, the company's core investment research and analysis platforms. ByAllAccounts, a Morningstar company, aggregates data from more than 50 529 college-savings plans and delivers it to portfolio accounting platforms. Morningstar also offers a family of 529 college-savings plan indexes. To receive more information about these solutions, click here.
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 individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 473,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 12 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 investment advisory subsidiaries and had approximately $169 billion in assets under advisement and management as of June 30, 2014. 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 nor should they be viewed as an assessment of a fund's or the fund's underlying securities' creditworthiness. This press release is for informational purposes only; any mention of a specific 529 college-savings plan should not be considered a solicitation by Morningstar.
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