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Morningstar Announces Annual Analyst Ratings and Research for Nation's Largest 529 Plans

Tuesday, October 22, 2013

Morningstar Announces Annual Analyst Ratings and Research for Nation's Largest 529 Plans

09:31 EDT Tuesday, October 22, 2013

Four Plans Rated Gold; Five Rated Silver; Four Rated Negative

CHICAGO, Oct. 22, 2013 /PRNewswire/ -- Entering its 10th year of helping 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 approximately 98% of the more than $181 billion in U.S. 529 plan assets. Of these plans, Morningstar has identified 32 that are likely to outperform their peers on a risk-adjusted basis over the long term.

Morningstar uses its qualitative Analyst Ratings scale to evaluate 529 plans, 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 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.

This year, Morningstar analysts awarded four Gold ratings, five Silver ratings, 23 Bronze ratings, 28 Neutral ratings, and four Negative ratings. Morningstar upgraded seven plans versus last year's ratings, while downgrading just one, reflecting an industry trend of better investment options and some improved tax benefits.

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.

Silver medalists:

  • Arkansas' iShares 529 Plan, managed by Upromise Investments;
  • California's ScholarShare College Savings Plan, managed by TIAA-CREF Tuition Financing;
  • Michigan's Education Savings Program,  managed by TIAA-CREF Tuition Financing;
  • Ohio's College Advantage 529 Savings Plan, managed by Ohio Tuition Trust Authority; and
  • Virginia's CollegeAmerica, managed by American Funds.

Negative Morningstar Analyst Ratings:

  • Kansas' Schwab 529 College Savings Plan, managed by American Century Investment Management;
  • Minnesota's College Savings Plan,  managed by TIAA-CREF Tuition Financing;
  • Rhode Island's CollegeBoundfund (Advisor-sold), managed by AllianceBernstein; and
  • Rhode Island's CollegeBoundfund (Direct-sold), managed by AllianceBernstein.

"This is not an industry that is sitting still. Since last year, we've seen many plans upgrade to stronger investments and aggressively shed poor investment options. Also, many plans are charging college savers less," said Laura Pavlenko Lutton, director, fund of funds research for Morningstar. "In the lone instance where we've downgraded a plan, it's because it has not kept up with industry-wide improvements rather than degradation in the plan's offerings."

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 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/529PlanRatingsChart2013. A summary of the ratings is also available in Lutton's Fund Spy column, available today on Morningstar.com along with a full week of special features on saving for college at: http://www.morningstar.com/goto/2013top529. A fact sheet with more information on the Analyst Ratings scale for 529 plans can be found here: http://global.morningstar.com/529Methodology.

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 approximately 433,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on approximately 10 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 $166 billion in assets under advisement and management as of June 30, 2013. 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.

©2013 Morningstar Inc.  All rights reserved.

MORN-R

Media Contact:

Shawn Malayter, 312-696-6050 or shawn.malayter@morningstar.com

SOURCE Morningstar, Inc.

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