OppenheimerFunds unit tapped to manage $160M 529 plan

The Tuition Plan Consortium has tapped OFI Private Investments Inc., a subsidiary of OppenheimerFunds Inc., to manage its…

The Tuition Plan Consortium has tapped OFI Private Investments Inc., a subsidiary of OppenheimerFunds Inc., to manage its $160 million Private College 529 Plan, replacing TIAA-CREF.
The organization, which is made up of 272 private universities and colleges, decided to switch managers to OppenheimerFunds because it wants to build its distribution, particularly through the adviser channel, said Nancy Farmer, president of the Tuition Plan Consortium.
“The No. 1 priority set by the board was to grow,” she said.
The board spoke to nine firms before choosing OppenheimerFunds.
The Private College 529 Plan is offered directly to consumers as a way to pay for tuition at any one of the private colleges and universities in the consortium.
Although the plan will still be offered through consumers and registered investment advisers, OppenheimerFunds is in discussions with broker-dealers about how it could make the offering available through their platforms, said Racquel Granahan, senior vice president and director of college savings at OppenheimerFunds.
Under federal law, fees can’t be applied to the sale of prepaid tuition plans, so a broker can’t get paid a commission, but it is a great product for registered investment advisers, she said.
OppenheimerFunds has had a few stumbles in the 529 marketplace over the past couple of years.
In November, the firm paid $20 million to settle a lawsuit with Oregon over allegations of management of the state’s 529 plan. In December, the firm agreed to pay $44.23 million to the state of Illinois related to its 529 plan.
The lawsuits alleged that OppenheimerFunds 529 plan managers invested too heavily in the company’s Core Bond Fund, which had placed sizeable bets on subprime and higher-risk securities. The fund lost 36% of its value in 2008.
The consortium reviewed OppenheimerFunds very carefully before making its choice, Ms. Farmer said.
“The board was very thorough with its vetting,” she said.