Offering gives investors access to four absolute-return funds; some fees will be waived through 2012
Nevada today launched the Putnam 529 for America, an adviser-sold plan that will include the fund company's four absolute-return funds, giving investors access to such funds within a Section 529 college savings plan for the first time.
Investors had been asking for this kind of offering, said state senior deputy treasurer Karen Duddlesten.
The four funds seek to outperform Treasuries by 700, 500, 300 and 100 basis points, respectively. They supplement Putnam's target date and asset allocation funds, and 11 stock, bond and cash funds in the plan.
The total operating expenses for the plan are 0.54% to 1.44%, but Putnam is waiving program management fees and annual maintenance fees until 2012, said Robert L. Reynolds, Putnam's chief executive.
Although the absolute-return funds may be a good complement to the lineup, they are just 18 months old and don't have a significant track record by which to gauge their performance, said Laura Lutton, an analyst at Morningstar Inc.
“My concern about the absolute-return funds is that they are relatively new, and given the importance of college savings to parents and kids, I would be reluctant to put my college savings dollars in an unproven investment,” she said.
The retail versions of the absolute-return funds may be new, but institutions and hedge funds have been using these funds for years, Mr. Reynolds said.
“By putting targets on these funds, we have more risk control than a traditional absolute-return fund,” he said.
Many people already are using the funds, despite the lack of history, Mr. Reynolds said. The funds have $2.5 billion in assets, and 9,000 individual advisers are using them, he said.
Putnam also is developing a tool that will allow advisers to log on to the firm's intranet site and view all their Section 529 client accounts on one page, Mr. Reynolds said. The tool will be available early next year.
Nevada said Sept. 16 that it had hired Putnam to offer an adviser-sold plan.
The state also has a contract for an adviser-sold plan through Columbia Management Group LLC that will end in the spring. The state will decide in the next few months whether it will maintain that relationship, Ms. Duddlesten said.
This week, Nevada said that it was cutting the fees on its direct-sold plan with The Vanguard Group Inc. by nearly half. Effective Oct. 15, the fees on the Vanguard 529 College Savings Plan will be 0.25% to 0.55,% depending on the portfolio, down from between 0.44% and 0.66%.
