Morningstar Issues Annual Ratings and Research of Nation's Largest 529 College Savings Plans

CHICAGO, Oct. 27, 2011 /PRNewswire/ -- In an effort to help college savers and financial advisors select the best 529 college savings plans, Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today issued its annual research study and ratings based on an analysis of the nation's largest 529 plans. The company has issued updated Morningstar Analyst Ratings and Reports on 58 plans that together manage more than 95% of the $133 billion in U.S. 529 plan assets.

Six plans received "Top" Morningstar Analyst ratings this year. They are (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;
• Ohio's CollegeAdvantage 529 Savings Plan, managed by Ohio Tuition Trust Authority;
• Utah Educational Savings Plan, managed by the agency of the same name; and
• Virginia's CollegeAmerica, managed by American Funds.  

In addition, 15 plans received "Above Average" ratings, 30 plans received "Average" ratings, and seven plans were rated "Below Average."

"Overall, the 529 industry has grown more competitive and responsive to college-savers' needs over the past year," said Laura Pavlenko Lutton, editorial director for fund research at Morningstar and a lead author of the study. "Plans have lowered fees, offered better investment options, and expanded distribution choices. None of the plans we reviewed this year warranted a 'Bottom' rating."

The Morningstar Analyst Rating for 529 Plans gives those saving for their child's college education a comprehensive assessment of an entire 529 plan. To determine a plan's Analyst Rating, Morningstar's mutual fund analysts consider five factors: the quality of the portfolio of investment options; the investment options' performance; the skill of the options' managers; the stewardship practices of the 529 plan's administration; and the costs associated with the plan. Analysts then assign ratings of "Top," "Above Average," "Average," "Below Average," and "Bottom." 529 plans receiving a "Top" rating incorporate the industry's best practices, including solid investment choices at a fair price.

Morningstar's comprehensive study—the 2011 529 College Savings Plans Research Paper and Industry Survey—also compared the performance and fees of 529 investment options and quantified the tax benefits associated with each state's 529 plans. Here's a summary of the study's findings:

• 529 plan assets increased by 12 percent over the previous 12 months through Sept. 30, 2011. That growth outpaced market returns for the period.
• Conservative allocation options in 529 plans have gained the most in asset flows during the first nine months of 2011 among Morningstar's static-allocation categories.
• The tax benefits of a 529 plan improve returns for investors relative to similar mutual funds, which can add up to significantly higher returns over the long term.
• Virginia had the most 529 plan assets of any state, with more than $29 billion in its advisor-sold and direct-sold plans.
• "Open architecture" plans—which include a variety of asset managers' funds in their offerings—did not have a consistent performance edge during the past year over "closed architecture" plans, which feature just a single firm's portfolio strategies.
• Categories of 529 investment options slightly trailed their open-end fund counterparts over the past five years as of Sept. 30, 2011, but the lead has changed hands in the midst of heightened market volatility. Several 529 categories led their corresponding open-end fund categories just two months earlier.

This is the eighth year that the company has reviewed 529 plans, and the second year that Morningstar has provided Analyst Ratings on plans as well as quantitative Morningstar Ratings on the investment options contained within them. To access the full Morningstar 529 College Savings Plans Research Paper and Industry Survey, please visit: http://global.morningstar.com/529Survey2011. For a full list of Analyst Ratings for each of the 58 plans, go to: http://global.morningstar.com/529PlanRatingsChart2011. A summary of the survey is also available in Lutton's Fund Spy column, available today on Morningstar.com at: http://www.morningstar.com/goto/2011top529.

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, as well as on Morningstar Direct, a web-based global investment analysis platform for institutional investors. Additionally, the new ratings and reports will be available in November through Morningstar Advisor Workstation, a web-based modular platform that provides financial advisors with investment planning, client presentation, portfolio analysis, and investment research tools.

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 330,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 5 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 has more than $167 billion in assets under advisement and management as of Sept. 30, 2011. The company has operations in 26 countries.

©2011 Morningstar Inc.  All rights reserved.

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Media Contact:
Shawn Malayter, 312-696-6050 or [email protected]

SOURCE Morningstar, Inc.