Oppenheimer Core Bond Fund Wreaks Havoc On 529 College Savings Plans
Many parents with money tucked away in 529 college savings plans are shocked to learn that their children’s future education could be at risk because of massive losses tied to the Oppenheimer Core Bond Fund (OPIGX). The bond fund, which is offered by 529 plans in Oregon, Texas, Maine and New Mexico, fell nearly 40% last year. By comparison, similar funds posted 4% gains.
Problems for the Oppenheimer Core Bond Fund are tied to bad bets made by the fund’s management team on high-risk mortgage-backed securities and credit-default swaps. When the housing market hit a wall last year and credit froze up, those investments essentially became worthless.
As reported Jan. 1 by USA Today, the Texas College Savings Plan’s had 50% of its assets in the Oppenheimer Core Bond Fund. As a result, the portfolio fell 21% in 2008.
Faring even worse is the state of Maine. Its NextGen College Investing Plan had 40% of its assets in the Oppenheimer Core Bond Fund. As of Nov. 28, 2008, the portfolio had fallen more than 42% in value.
Parents, many of whom have students either about to enter college or currently enrolled, are now feeling the repercussions of the fund’s unexpected losses. Making matters even worse, the fund was marketed as ultra-safe and a conservative investment.
In Oregon, OppenheimerFunds manages the portfolios of three plans under the 529 College Savings Network. Parents who invested in some of the college savings plans most conservative portfolios have now lost thousands of dollars because of the Oppenheimer Core Bond Fund. Currently, Oregon’s state attorney general’s office has launched an investigation to determine if Oppenheimer misrepresented the bond fund to investors.
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