AllianceBernstein cuts target date fund fees for R.I. 529 plan

AllianceBernstein LP has reduced the target date fund fees for Rhode Island residents who invest in its Section 529 college savings plan.
The asset manager has agreed to lower the operating expenses for the actively managed funds to 20 basis points. Previously, the funds’ expenses ranged from 72 to 94 basis points, according to Patricia Roberts, senior 529 product manager for AllianceBernstein.
The reduction in fees follows Rhode Island’s renewal of its contract with AllianceBernstein to manage both its in-state plan and its national plan, she said.
“We are exclusive partners with Rhode Island on both plans,” Ms. Roberts said.
AllianceBernstein has been the program manager for Rhode Island’s 529 plans for the past 10 years, and under the renewal, it will continue its relationship for another five. The investment firm’s in-state plan has about $248 million in assets, and its national CollegeBoundfund plan has about $7.4 billion.
AllianceBernstein’s move to reduce its fees comes as more states are trying to make their in-state plans more competitive by pushing managers to lower expenses, said Laura Lutton, an analyst at Morningstar Inc.
In December, Fidelity Investments lowered the fees on its 529 portfolios by almost 50%. In March, TIAA-CREF decreased the management fees on the 529 investments for residents of Oklahoma to 0.4%, from 0.65%.
“States want to make sure their residents who are saving for college are getting a good deal,” Ms. Lutton said.
AllianceBernstein’s fee reduction is particularly significant because there are very few, if any, actively managed target date funds in the 529 market with such low expense ratios, said Joseph Hurley, chief executive and founder of Savingforcollege.com.
“The plans with funds in that expense range are all index-based,” he said.
AllianceBernstein is able to offer the funds at such a low cost because they invest in “pooling portfolios,” or institutionally priced mutual funds, said Jennifer DeLong, a spokeswoman for the firm.