The State of Rhode Island has added a stable value investment option from Aegon Institutional Markets to its 529 plan, Lynn Allen, director of public markets at the firm, told the MutualFundWire.com. The provider for the plan is Alliance Capital.

"This is the first time a provider has come to us and asked us for our stable value fund to be a part of the 529 lineup," Allen reported. "In this volatile market, stable value is gaining more and more acceptance. First, it was something that the states wanted. Now, financial advisors are finding that they want it to be a part of their program."

Aegon's stable value offering is a part of the South Carolina 529 plan as well. Bank of America is the provider for that plan.

"Financial advisors have seen that they need a safe option, a bond fund returns with the volatility. In the case of South Carolina, the stable value option was just going to be available to state residents. But the financial advisors really wanted it for the national program," the executive contended.

Allen sees a growing acceptance for stable value in 529 plans. "Rhode Island is going to be a leader by example. The state has the more progressive and sophisticated 529 plan in the country," she continued. Allen stated that the stable value offering has been active for less than a month in the plan and has approximately $10 million in assets under management.

Looking to the future, Allen believes that the next big move for stable value in the 529 arena will be stable value products designed specifically for the different age space. "Stable value is more important for 529 plans than it is for 401(k) plans. With a 401(k) plan, you have about 40 years of investing. With a 529 plan, the window is much more limited. And, we have found, that investors are much less risk tolerant with their kids' college fund than they are with their own retirement fund. They see it as a big obligation."

Allen concluded by stating that Aegon hopes to close three or four more 529 plan RFPs calling for stable value options. 

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