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Ohio 529 Board Approves Investment Changes In College Savings Program

Dimensional to be added; PIMCO and GE Asset Management to be dropped from CollegeAdvantage Direct Plan

The Ohio Tuition Trust Authority (OTTA) Board recently approved changes to be made to investment managers and fund offerings in the CollegeAdvantage 529 Direct College Savings Plan. The following changes were approved, but a future implementation date has not yet been established:

OTTA will be exchanging outgoing investment options with newly selected options offered by Vanguard, the plan’s primary investment manager, as well as funds offered by Dimensional Fund Advisors (Dimensional), a newcomer to the CollegeAdvantage lineup. Based on extensive research, Dimensional was recommended because it offers relatively low-cost options and has many products that are ranked highly by OTTA’s investment consultant, Wilshire Associates, Inc.

On the outgoing side, PIMCO’s two investment options will be dropped from the plan. After significant organizational changes within PIMCO, Wilshire’s Manager Research Group lowered their overall assessment of the firm. In addition, customer contributions to the PIMCO options have decreased over the past several months. The PIMCO funds in the current CollegeAdvantage lineup will be exchanged to Vanguard and Dimensional funds.

GE Asset Management, which only had one fund in the CollegeAdvantage Direct Plan, will also be eliminated from the plan. The fund has had weak long-term performance, organizational changes, and has also seen a shrinking share of customer contributions. The fund will be exchanged with a Dimensional fund.

The total number of investment options in the CollegeAdvantage Direct Plan will increase from 23 to 24 with the addition of a passive fixed income option from Vanguard. Also, within the Vanguard family of options, OTTA will swap an inflation protected bond option with one that seeks to better mitigate interest rate risk, as well as exchange an international index option with another that will gain investor exposure to emerging markets.

The Board also approved Vanguard’s recommended changes to its age-based and risk-based offerings. The changes will include modest increases to the international component of its equity allocation, broaden international equity to include emerging markets, introduce international fixed income to the allocation, and shorten the duration of the inflation protected allocation in the portfolios.

Lastly, the Board was informed about Wilshire’s plan to optimize allocations in the Advantage Age-Based Portfolio (AABP), which is a privately-designed portfolio managed by Wilshire for CollegeAdvantage. Wilshire’s recommended reallocation makes changes that seek to smooth the transition between equities, fixed income, and cash as the beneficiary moves through the age bands.

These changes to the CollegeAdvantage Direct Plan investment offerings will result in a slight decrease in the average expenses of the investment options, while also enhancing efficiencies, filling gaps in the array of investment options offered, and reducing certain risks to the investor.

A minimum of 90 days will be required to implement these changes. Customers will later be notified about the effective date and the mapping of existing funds to new funds.


Posted on March 3, 2015

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