Oregon College Savings Could See "Strong" Outflow

October 31, 2003 (PLANSPONSOR.com) - Reverberations of the Strong Financial fiasco are spreading all the way to Oregon and the state's college savings plan.

More than half of the $134 million in the Oregon College Savings Plan – one of three college savings plans sponsored by the state – is currently being managed by Strong, whose chairman is currently under scrutiny from New York State Attorney General Eliot Spitzer on allegationsused his fund company to personally profit at the expense of his investors (See Spitzer Looking at “Strong” Arming Mutual Fund Head ). The implications is that as Strong goes, so goes the college savings plan, thus spelling disaster for thousands of Oregon parents saving for their children’s college education, according to a Portland Tribune report.

For the moment, no action has been taken and the state’s TreasurerRandall Edwards, whose agency administers the college savings programs, is taking a go-slow approach to the question of whether to dismiss Strong from involvement in the Oregon college savings program. However, the state cautions the immediate risk to investors in the plan is the prospect of a rush to withdraw money from the Strong funds if the charges against the money manager are found to be true. This in turn could sharply depress the value of Oregon savings plan holdings.

Examinations into Strong are nothing new for the Beaver state, which had already been questioning the company’s performance record. Investment professionals say Oregon investors have been saddled with high fees for sub par performance.

Families who began investing in the Oregon college savings plan when it started nearly three years ago have lost money in four of its six portfolios, broken even in a fifth and barely come out ahead in the sixth. Further, investment performance in all six of the portfolios has significantly trailed the benchmarks that the program’s own board of directors set when the plan was established in January 2001.

Oregon is not alone in its concern. Yesterday, the State of Wisconsin said it would take a “wait-and-see” approach before deciding any course of action with state investments currently managed by Strong.Any move by Wisconsin would directly affect the state-sponsored 529 college-savings plan EdVest, for which Strong manages $1 billion (See Wisconsin Weighing Strong, EdVest Relationship ).