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Texas Lonestar |
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State Provider: Texas; Net Assets ($mil):
$93.0 as of
10-31-09 |
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Texas' Lonestar 529 Plan is on the mend, but it still has problems. This advisor-sold plan, managed by Oppenheimer, had exposure to some of the bond world's worst offenders in 2008. In particular, the plan had assets in Oppenheimer Core Bond, a fund that sustained steep losses in 2008 due to management's big bets on illiquid securities. The plan also had exposure to Oppenheimer U.S. Government Trust (run by the same management team), which didn't fall as hard in absolute terms but significantly lagged peers in 2008. As a result, the plan's "Age Based 15 - 17 Years Portfolio" had 60% devoted to those troubled funds and fell 23% in 2008. And the plan's formerly named "Core Bond Portfolio," which had 100% exposure to Oppenheimer Core Bond, fell an astonishing 36% in 2008. Problems began to surface at these deeply flawed Oppenheimer fixed-income products in November 2008, but it took the state four months to take action. In mid-March 2009--long after it became painfully clear these investments were deeply distressed--Oppenheimer Core Bond was replaced with a capable low-cost index option from Dreyfus. Unfortunately, U.S. Government Trust is still in the plan, in both the age-based options and as a stand-alone fund. The plan's overall fees are reasonable for a broker-sold plan, ranging from 0.75% to 1.27%. Although it's worth pointing out that the plan's Dreyfus fixed-income option, whose chief appeal is its low underlying costs, is made much less attractive by an additional 0.30% administrative fee (which is double the cost of the underlying fund's expenses), on top of additional 0.25% fees for program management and state administration. On the positive side, the plan's underlying holdings are respectable (with the exception of U.S. Government Trust), and investors have good flexibility among age-based, static, and individual fund options. But that's not enough to make up for the plan's shortcomings. We'd avoid this plan until its fixed-income exposure gets cleaned up. (Information as of 04/06/2009) |
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| Availability: Sales Channel |
Resident: Broker
Non-Resident: Broker
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| Annual State Tax Deduction |
| Max Investment/Beneficiary |
| Mos. to Qualified Withdrawal |
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Public, Private & International
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Age-Based Portfolios
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| Static Portfolios and Self-Directed Funds |
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| US Stock
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Bond |
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| Total International Funds: 2 |
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| Underlying Funds’ Ratings |
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| Overall Morningstar Rating |
# Equity
Funds |
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# Bond
Funds |
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| Ratings as of
10-31-09 |
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| Range |
0.00
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1.1 |
| 529 Plan Avg |
0.8 |
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| Portfolio Expense Ratio Range |
| Fee to Change Beneficiary |
| Share Classes: Sales Charge |
| A:
5.75% (front-load) |
| B:
5% (deferred-load) |
| C:
1% (deferred-load) |
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| Initial Purchase |
$25 |
$25 |
| Additional Purchase |
25 |
25 |
| Initial (AIP) |
15 |
15 |
| Additional (AIP) |
15 |
15 |
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