January 6, 2009

Westlund takes over ailing college fund
Overall, the plan has lost about 25 percent of its worth

By RYAN KOST
Associated Press writer


     SALEM — Democrat Ben Westlund took the oath of office as state treasurer Monday, inheriting a college savings plan that has suffered deep losses from investments that were billed as conservative.
     Legislative leaders have promised a hearing on the issue within the first few weeks of the upcoming session and to offer a safer alternative that would allow Oregonians to invest in prepaid tuition.
     Incoming Secretary of State Kate Brown and Attorney General John Kroger also took their oaths Monday.
     Westlund took a moment following his swearing-in ceremony to highlight a prepaid tuition plan he and Senate President Peter Courtney announced last week. He said the program would help protect families from market fluctuations that have rocked the Oregon College Savings Plan. It would work as an alternative and not a replacement.
     Though the treasurer’s office is typically low-key, Westlund is stepping into the role at a time when the markets have delivered a number of challenges, among them, the college plan’s recent instability.
     “Certainly, the current economic climate does shine a bright light on the function of this office,” Westlund said later in his office.
     Overall, the plan has lost about 25 percent of its worth, but the piece that’s receiving the most attention is the Oppenheimer Core Bond Fund, which lost 38 percent of its value.
     The fund was largely tied in with the Plan’s most conservative option, marketed toward thousands of families with children in college or about to start.      Their funds, as a result, have seen a 9 percent drop overall.
     “OppenheimerFunds understands the importance of the investments in State 529 plans as a means to save for the educational needs of children and we take our responsibilities as an investment manager very seriously,” spokeswoman Jeaneen Pisarra said in an e-mail. “We think it is important to put the Core Bond Fund’s performance in context ... virtually every type of investment has felt the effects of extraordinary events in stock and bond markets around the world.”
     The problem, however, is that many say the Core Bond Fund performed worse than others like it. The Oregonian newspaper reported that comparable funds posted 4 percent gains.
     OppenheimerFunds has since replaced the fund’s manager.
     Westlund and outgoing treasurer Randall Edwards have asked the attorney general to look into the matter and whether OppenheimerFunds had mismanaged the money. Edwards said he has no reason to believe the firm did.
     Edwards, who is invested in the Plan himself — his daughter is about to turn 16 — said he understands investor anger.
     “I personally regret that we’ve had this problem in one fund and the fact that the stock market has just punished people,” Edwards said. But, he stressed, Oregon didn’t do anything unique in handing a piece of the plan to OppenheimerFunds and that the investments would have been sound “under normal circumstances.”
     The attorney general’s office says is has received the investigation request but had no further comment.
     The Legislature also hopes to look into what went wrong with the investment, though Rep. Sara Gelser, D-Corvallis, who chairs the House Education Committee, said they would focus not on blame but on ways to avoid another loss and to help those who have already been dealt financial blows.