American Funds plans to bring its 529 savings plan up to speed with the rest of the industry by launching its first college target date funds this September.
The addition of college target date funds will give American Funds' $33 billion CollegeAmerica 529 Savings Plan a similar menu of options as other 529 plans, the majority of which already offer advice-embedded products.
“American was always the big anomaly,” said Janet Yang, analyst at Morningstar Inc.
The CollegeAmerica plan is offered only through financial advisers, so American Funds was content to let the adviser develop its own allocations based on time horizon and risk tolerance using its funds. However, lately demand from advisers for one-stop offerings has been on the rise, said Chuck Freadhoff, spokesman. “What we're doing is simply responding to adviser requests to make it easier to do business with us,” he said.
Target date funds in 529 plans have proved to be as popular as target date funds in retirement plans, Ms. Yang said. “‘Set it and forget it' options are usually the most popular,” she said.
Popular funds would be a change of pace for American Funds. Despite being an adviser favorite and the second-largest mutual fund family, it's been nearly three years since the mutual funds had net inflows. In the first quarter, the fund family shed another $16 billion; no other fund family in the top five in terms of assets had net outflows.
The American Funds College Funds will have target date funds ranging from 2012 to 2030 and be managed along an 18-year glide path. The funds will gradually shift from primarily growth and income funds at inception to more conservative equity and income and bond funds as they reach the target date. American Funds did not disclose expense ratios in a filing with the Securities and Exchange Commission.
American Funds is also planning on launching similar pre-mixed portfolios of its funds that target goals such as income or growth next month. http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20120115/REG/301159992
“All of a sudden they're launching all of these pre-mixed portfolios. It's kind of surprising,” Ms. Yang said. “Any kind of tools to help advisers manage portfolios has got to help, though.”