Oct. 18–Responding to pressure from state officials, Strong Capital Management said Friday it would consider opening up its exclusive contract to manage Wisconsin’s EdVest college savings program.

In a statement, Sarah Henriksen, director of education planning for Strong, said the Menomonee Falls-based mutual fund company would consider involving competing companies in the college savings plan, made tax-free under Section 529 of the federal tax code.

“Strong is always open to discussing initiatives that help meet the best interests of Wisconsin families saving for college,” Henriksen said. “These discussions may include involving other investment firms in the Wisconsin 529 plans… or other opportunities that may give investors the ability to choose the plan that best meets their needs.”

State Treasurer Jack Voight, whose office administers the EdVest program, said he hoped to see an amended contract within a year.

Strong company officials are “interested in pursuing another mutual fund company to work with Strong in providing another investment option to support the program,” Voight said, adding, “More choices are better for the investors.”

Strong currently has a five-year deal, expiring in May 2006, to manage more than $1 billion in investments in the EdVest and Tomorrow’s Scholars programs. Strong has been under close scrutiny since September, when New York attorney general Eliot Spitzer alleged that a New Jersey hedge fund had used its size to gain improper trading privileges from Strong and three other mutual fund companies.

Following the complaint, the Wisconsin College Savings Program Board asked the state Department of Administration to look into amending Strong’s contract to bring in other investment companies.

Michael Wolff, finance programs manager for the department, said state officials were still considering their options and had not yet contacted Strong.

“We are not presently looking at other companies. I think that would be premature,” he said.

Marty Olle, the EdVest manager at the state treasurer’s office, said that if another company were added, investors could switch their assets to the new fund manager without any penalty.

Olle said that since the college savings board meeting, three investment companies had called his office to ask about becoming part of the EdVest program. He said the growing size of Wisconsin’s college savings programs $1 billion now compared to just $8 million in 2001 made them much more attractive to companies than they were when Strong won its exclusive contract.

“We don’t look so small anymore,” Olle said.

Robert W. Baird & Co., Hartford Life, TIAA-CREF and The Vanguard Group all bid for the original contract, along with Strong.

Paul Herbert, a mutual funds analyst with the Chicago-based ratings service Morningstar, said investors might be better served by an alternative to Strong, such as a low-fee company like Vanguard. Morningstar is recommending that investors including those in EdVest consider getting out of Strong funds, Herbert said.

“The fees are high, especially if you look at neighboring states’ (college savings) plans like Minnesota,” he said. “The performance has really been so-so.”

In the past, Strong has said it provides added benefits that justify its fees, such as a 24-hour customer service line.

In her statement Friday, Henriksen said of the possibility of new investment options, “We are confident that with expanded choices, Wisconsin families will continue to find EdVest an excellent plan for their college savings needs.”

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