Consultant asked to offer stock cap for college plan

Chairman of Md. panel on investing for tuition had proposed 65 percent

February 15, 2002|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

The Maryland Higher Education Investment Board asked its consultant yesterday to come up with a recommendation on the maximum the state's prepaid tuition plan should be allowed to invest in the stock market.

Currently, the prepaid plan can hold as much as 80 percent of its portfolio in equities, although plan officials say it rarely has reached that level. At the end of January, stocks made up about 63 percent of the $83.7 million portfolio.

Board Chairman Edwin S. Crawford proposed that the limit for stocks be about 65 percent given that the plan is finding that the bulk of tuition contracts are being purchased for children now in middle school. Because the children are older, they will be tapping into the funds earlier, so the money needs to be invested more conservatively.

The board also asked its consultant, Watson Wyatt Investment Consulting, to recommend a "trigger" level so that when stocks or bonds in the portfolio reached a certain percentage, the board would have to review the investments to see what, if any, action should be taken.

Maryland's prepaid tuition plan allows parents and others to lock-in future tuition at today's prices for Maryland's public colleges, with the money invested to cover future costs.

Two years ago the legislature took steps to help assure that costs would be covered. It required the governor to submit a budget request should there be a shortfall.

At the meeting in Annapolis yesterday, the board agreed to add a large-cap value fund to the prepaid plan's portfolio and asked Watson Wyatt to recommend one. The portfolio currently has an S&P 500 Index fund, a small- to mid-cap stock fund and two bond funds as well as cash holdings.

The board also oversees Maryland's college savings plan, launched in December, where parents and others have investment accounts for children. T. Rowe Price Associates manages the plan.

In an update, the board was told that at the end of January, the plan had 29,850 accounts with a total of $106.3 million.

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