Rhode Island’s CollegeBoundfund has earned a poor performance rating from Morningstar, a Chicago-based investment research firm, which also said it has concerns about the fund manager.
“AllianceBernstein in New York, the program manager for the Rhode Island CollegeBoundfund, is a firm that’s been losing assets,” said Laura Lutton, director of fund research at Morningstar. “Its investments have been underperforming and we’ve seen a lot of turnover in the staff managing assets at the firm.
“It was rated poorly in the previous years as well, in 2011 and 2010,” said Lutton earlier this month, following the May release of the fund’s performance rating. “This has been a longer-time concern about the health of AllianceBernstein and the firm’s ability to manage the 529 assets over the long-term.”
After 13 years of the New York firm’s management of the CollegeBoundfund, Bob Keith, head of the AllianceBernstein’s Global Client Group, disputed the findings and said the Rhode Island fund is “widely accepted and broadly used.”
The Rhode Island CollegeBoundfund is one of the largest 529 plans in the nation, ranking second nationally in the 529 category of an adviser-sold program, based on assets under management, with $7.6 billion, Keith said.
“This is the lowest-cost, actively managed, age-based offering in the nation,” said Keith.
The Rhode Island CollegeBoundfund has 450,000 accounts, with about 25,000 from Rhode Island residents, of which 14,979 are directly invested, according to AllianceBernstein. Parents or grandparents who don’t go through an adviser invest through the CollegeBoundfund Direct, which was not rated by Morningstar.
Morningstar’s review is based on its latest round of 529 plan ratings completed in October 2012, Lutton said.
Morningstar rated the Rhode Island’s College Bound Fund a 1.51 out of a possible 5, compared to some of the highest-ranked funds, including the Maryland College Investment Plan at 3.82, the T. Rowe Price College Savings Plan for Alaska at 3.81, the Vanguard 529 College Savings Plan for Nevada at 3.57 and the Utah Educational Savings Plan at 3.11.