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Education savers in The Vanguard 529 Plan got a lucky boost that may have amounted to over $200 million when an error led to them getting more equity exposure than they signed up for as equity markets rallied in late 2020 and early 2021. The plan s state sponsor Nevada and its investment consultant crafted unintentionally riskier asset allocations for a suite of new portfolios developed to supplant its popular legacy suite of age-based portfolios. Last October, Vanguard applied these misguided recommendations, leaving accountholders in these new portfolios exposed to up to 20 percentage points more in stocks than they had bargained for, placing $12.5 billion of education savings in a precarious position. Since equity markets appreciated over that time, it s possible that accountholders invested in these troubled portfolios actually earned up to an additional 4%, until Vanguard corrected the error on March 24, 2021.
Editor s note: This is adapted from the Morningstar Direct U.S. Asset Flows Commentary for January 2021. Download the full report.
While the performance of most major asset classes took a step back in January 2021 following a stellar 2020, investor preferences remained largely consistent. Long-term mutual funds and exchange-traded funds picked up $95 billion in new assets, marking the 10th consecutive month of inflows since the $326 billion exodus from those funds in March 2020.
Most of January s inflows again found their way to passively managed funds, which took home $55 billion. ETFs many of which are passively managed raked in $58 billion during the month versus $37 billion for open-end mutual funds, marking the 30th time they ve had the advantage over mutual funds in the prior 36 months.