State Officials Defend ‘Worst Ranked’ College Fund

State Officials Defend ‘Worst Ranked’ College Fund

State officials yesterday rushed to the defense of Rhode Island’s public college savings fund after a national investment research company ranked it as the worst in the country.

The fund, formally known as Collegeboundfund, is a state program that is run through a private investment firm, AllianceBernstein. Collegeboundfund is a national program, but the only state government it is affiliated with is Rhode Island's. Because it’s a state-affiliated program, Rhode Islanders who choose to participate can receive special tax benefits.

Last month, Collegebound was ranked as the worst state college savings program by Morningstar, which is based in Chicago. But yesterday, General Treasurer Frank Caprio told GoLocalProv that Morningstar didn’t take into account the advantages Rhode Islanders have under the program.

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“The Collegebound fund is a national program that has one set of fees and options for residents of the other 49 states and then a very favorable set of fees and options and matching grants [for Rhode Islanders],” Caprio said. “When Morningstar’s firm reviewed the accounts I’m very concerned about how they do the in-state accounts.”

‘Little if any review’ of state accounts

Caprio said Morningstar had done “little if any review” of the accounts Collegebound has in Rhode Island.

He said Collegebound offers Rhode Islanders the lowest fees, creates starter accounts for newborn infants, and has a two-for-one match for most households in the state.

“I’m very confident that Rhode Island will always be at the top of any review when you look at those options that Rhode Islanders have,” Caprio said.

Impact of the recession

Caprio made his comments after a meeting of the State Investment Commission where representatives of AllianceBernstein made a presentation on the program, saying it had performed well over the long term. They said the Morningstar analysis had focused on just one year—2008, when the recession hit.