Data & Research May 16, 2011

Flows into 529 Plans Growing Rapidly

The Financial Research Corporation (FRC) found that net flows into 529 college savings plans have increased by 75% over the past two years.
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The report, “529 Plans and Distribution Analysis,” reveals that investors are continuing to invest more money into 529 plans and at faster rates.

“Contributions into 529 plans have increased by more than 35% annually over the past two years,” said Paul Curley, author of the study and Director of 529 College Savings Research at FRC. “New account openings have increased by 15%, and total account openings have also increased by 5%. We expect that college savings plans will continue to gather assets as outflows of money markets persist. Since 2008, investors have transitioned nearly $1 trillion in assets from money market mutual funds into long-term investment products.”

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The study examines drivers of this surge, including investor behavior trends, innovations occurring with 529 plan products, and new marketing and distribution strategies. The report also provides actionable suggestions for 529 program managers and state agencies seeking to take advantage of the popularity of 529 plans.

The study’s authors concluded that since 529 plans have a complex product structure, advisers should focus on easy access to education and product knowledge, which the report discusses in further detail. The report also highlights the effect exchange-traded funds (ETFs) are having on 529 plans; FRC expects more plans to leverage the ETF portfolio structure as they tend to provide well-priced index exposure.

The report findings are based on recent interviews FRC conducted with 529 plan managers and financial advisers, a survey of investors, and quantitative analysis of FRC’s proprietary 529 college savings data. To purchase the report, contact the FRC sales department at 866-532-8009.

Products May 16, 2011

Russell Introduces Investment Disciple Indexes

Russell Investments launched an index family that reflects six investment disciplines in the U.S. large cap equity class.
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Each of the new Russell Investment Discipline Indexes defines and reflects a particular approach to security selection commonly practiced by professional investment managers, according to the announcement.  

To develop the Russell Investment Discipline Indexes, Russell analysts defined the six most common approaches of professional investment managers in identifying attractive investment opportunities and categorized them into individual disciplines. The full suite of Russell Investment Discipline Indexes includes the Russell U.S. Large Cap Aggressive Growth Index, Russell U.S. Large Cap Consistent Growth Index, Russell U.S. Large Cap Growth at a Reasonable Price (GARP) Index, Russell U.S. Large Cap Equity Income Index, Russell U.S. Large Cap Low P/E Index and Russell U.S. Large Cap Contrarian Index.  

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In order to reflect the return pattern of a typical manager within a specific investment discipline, the construction of each index is unique to the respective discipline being approximated. For example, the screening technique used to construct the Russell U.S. Large Cap Low P/E Index differs from the methodology for the construction of the Russell U.S. Large Cap Consistent Growth Index.   

More information on these indexes and returns is available here.

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