The Ohio Tuition Trust Authority has chosen
BlackRock Inc. as the program manager of its adviser-sold $3.5 billion Section 529 college savings plan, replacing Putnam Investments and marking the end of a 10-year relationship with the latter firm.
Ohio tapped
BlackRock to provide a second adviser-sold 529 plan last June because it had some concerns about Putnam's performance, Mike Prescott, executive director of the OTTA, said in an interview.
“Putnam had been through a lot in the market and had disappointing investment returns, and we wanted to give our customers the option of another plan,” he said.
But this week, the board voted to drop Putnam altogether, and use
BlackRock as its exclusive adviser-sold 529 plan provider.
Ultimately, the decision to go with
BlackRock wasn't just about performance, Mr. Prescott said.
“I would say it was more complicated than that,” he said. “We went through an exhaustive analysis of both firms, and we just felt that our agency and our customers would be better-served by partnering with BlackRock.”
Ohio's decision comes as a blow to Putnam, as it was the only state in which the company sponsored a 529 program, said Andrea Feirstein, managing member of AKF Consulting Group.
“Putnam has been a long-standing player in the business,” she said. “This is a big hit.”
The company has made a concerted effort over the past few years to hold on to the 529 program, noted Bridget Bearden, an analyst with Financial Research Corp.
In December 2008, Putnam opened up the program to outside funds. And over the past few years, the company has focused on improving its fund performance.
The plan had risen from the bottom of Savingforcollege.com's 529 plan rankings to second place in its one-year rankings as of March 31, according to Joseph Hurley, chief executive and founder of Savingforcollege.com.
Putnam will remain in the 529 business and will seek out other state mandates, Robert L. Reynolds, the firm's president and chief executive, said in a press release.
But Putnam's loss is a big win for BlackRock, marking the first time the firm has been selected to manage a 529 plan exclusively.
BlackRock will spend the next few months working with Ohio to transition advisers to its own investments, said Frank Porcelli, managing director and head of BlackRock's U.S. retail business. The transition will take effect Oct. 1.
“We have a mapping strategy that we are working on with Ohio,” Mr. Porcelli said in an interview.
“The transition will be seamless,” he said. “
BlackRock isn't new to doing transitions of assets.”
BlackRock has no plans to go after other 529 plans right now, Mr. Porcelli said.
