Investment Options
Building a Section 529 account that is right for you takes planning. The Kentucky Education Savings Plan Trust (KESPT) offers you a choice of six Investment Options. These options vary in their investment strategy and degree of risk, allowing you to select an option or combination of options that may fit your needs.
For more information on the risks involved in investing in such Investment Options, and the type of investor for whom each Investment Option may be appropriate, read the Disclosure Booklet (PDF).
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Investment Options
- Managed Allocation Option
- Active Equity Option
- Equity Index Option
- Balanced Option
- Fixed Income Option
- Guaranteed
Changing Your Investments
Once you invest in a particular Investment Option, you can transfer contributions and any earnings to another Investment Option once per calendar year or upon a transfer of funds to a KESPT account for a different beneficiary.
Periodically Review Your Investments
It's a good idea to periodically re-evaluate your investment strategy as your goals, investment horizon, and personal situation change—for example, annually at tax time, on a yearly basis if your income changes, or upon the birth of another child.
Managed Allocation Options (Risk level shifts from Aggressive to Conservative)
The Managed Allocation Option is designed to take into account the Beneficiary's current age and the number of years before the Beneficiary turns 18 and is expected to enter college. Allocations to the Managed Allocation Option will be placed in one of six Age Bands, as determined by the Beneficiary's current age. Each Age Band has a different investment objective and investment strategy, which are matched to the Beneficiary's expected investment time horizon.
The Age Bands for younger Beneficiaries seek a favorable long-term return by investing primarily in Mutual Funds that invest in equity or real estate-related securities, which carry a high level of risk, but offer potentially greater returns than could be achieved, by investing in more conservative investments. As a Beneficiary nears college age, your investments attributable to the Managed Allocation Option will be moved to more conservatively-invested Age Bands. The Age Bands for older Beneficiaries allocate less to Mutual Funds that invest in equity and real estate-related securities and allocate more heavily to Mutual Funds that invest in fixed-income and money market securities to preserve capital.
As the Beneficiary ages, assets in your Account that are attributable to this option are moved from one Age Band to the next on the first "rolling date" following the Beneficiary's fourth, eighth, twelfth, fifteenth and eighteenth birthdays. The rolling dates are March 20, June 20, September 20 and December 20 (or the first business day thereafter).
Managed Allocation Option
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Allocations for all investments are as of April 2013. Allocations are reviewed and adjusted periodically.
Active Equity Option (Risk level - Aggressive)
This Investment Option seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in a combination of actively managed equity Mutual Funds.
Assets in this Investment Option are allocated to Mutual Funds that invest heavily in domestic and foreign equity securities, which carry a high level of risk, but offer potentially greater returns than could be achieved by investing in more conservative investments. Because of the high exposure to domestic and foreign equities, and the corresponding high degree of risk, this Investment Option may be appropriate for you if you already have substantial college savings from less volatile investments (e.g., fixed-income) or you have a long investment horizon and you can tolerate a higher level of risk.
Equity Index Option (Risk level - Aggressive)
This Investment Option seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in equity index Mutual Funds. Because of the high exposure to domestic and foreign equities, and the corresponding high degree of risk, this Investment Option may be appropriate for you if you already have substantial college savings from less volatile investments (e.g., fixed-income) or you have a long investment horizon and you can tolerate a higher level of risk.
Balanced Option (Risk level - Moderate)
This Investment Option seeks to provide favorable returns that reflect the broad investment performance of the financial markets through capital appreciation and investment income by investing in a balanced combination of equity and fixed-income Mutual Funds. This Investment Option may be appropriate for you if you have a medium to long investment horizon and can tolerate a moderate level of risk.
Allocations for all investments are as of April 2013. Allocations are reviewed and adjusted periodically.
Fixed Income Option (Risk level - Moderate)
This Investment Option seeks to provide preservation of capital along with a moderate rate of return by allocating assets to Mutual Funds that invest in a diversified mix of fixed-income investments. This Investment Option may be appropriate for you if you have a medium to short investment horizon and can tolerate a moderate level of risk.
Guaranteed Option (Risk level - Conservative)
This Investment Option seeks to preserve capital and provide a stable return. It may be appropriate for you if you have a short investment horizon and are looking for a conservative investment with a low level of risk. The contributions invested in this Investment Option are allocated to a Funding Agreement issued by TIAA-CREF Life to the Trust, which is the policyholder under the agreement. The Funding Agreement provides for a return of principal plus a guaranteed rate of interest and allows for the possibility that additional interest may be credited as declared periodically by TIAA-CREF Life. The interest rate guarantee is made only to the Trust, and not to Participants or Beneficiaries. The rate of any additional interest is declared in advance for a period of up to 12 months and is not guaranteed for any future periods. The term of the Funding Agreement is intended to coincide with the term of the Management Agreement.
Effective July 1, 2012, accumulations under the Funding Agreement for the Guaranteed Option as of June 30, 2012 as well as any contributions received and earnings on those contributions from July 1, 2012 until further notice, will be credited to the Kentucky Education Savings Plan Trust with an effective annual interest rate of 1.35% and are guaranteed to earn this rate through June 30, 2013, subject to the claims paying ability of TIAA-CREF Life Insurance Company.
Account values are not guaranteed and will fluctuate with market conditions. For a complete discussion of risks associate with each Investment Option, please refer to the Disclosure Booklet.
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