CHARLESTON – West Virginia Treasurer Riley Moore has announced a state program that oversees the SMART529 is adopting his proposal to exclude China-based investments.
Moore, who serves as chairman of the Board of Trustees of the West Virginia College and Jumpstart Savings Programs, said April 17 the board approved the plan to transition the emerging markets investment option in the SMART529 Select Plan to a fund that excludes investments in China-based companies.
He said the decision was made after a study determined the move away from Chinese investments would be in the best financial interests of plan participants.
“We have a fiduciary duty to act in the best financial interests of SMART529 plan participants, and we believe excluding Chinese emerging market investments from our Select Plan portfolio will help maximize returns while reducing exposure to the potential regulatory and geopolitical risks that come with investing in companies based in China,” Moore said. “I’m grateful to the board members for carefully considering this recommendation to reduce exposure to these more risky Chinese investment options.”
The SMART529 Select Plan is a national college savings plan with underlying funds advised and actively managed by Dimensional Fund Advisors. The Select Plan offers participants nine age-based and 10 static portfolios from which to choose. Emerging markets investments make up between 0 to 10 percent of those funds, based on their risk profile. The Select Plan had been using the DFA Emerging Markets Core Equity Portfolio, which includes China, as an underlying component of its age-based and static portfolios.
But in late 2021, Moore began talks to explore the possibility of moving the funds away from Chinese investments. Dimension created a new fund around the same time that does not include investments in Chinese-based companies.
And earlier this year, Dimensional told board members the ex-China fund not only outperformed the traditional emerging markets fund since its inception but also presented a simulation dating back to 1994 showing that the ex-China fund would have outperformed the traditional fund across that time period as well.
Also, investment consultant NEPC told the board that “ongoing geopolitical tensions between China and the U.S.” along with China’s tendency to quickly shift domestic policies could mean significant investment risks.
“China’s domestic policies can create periods of heightened volatility and it is possible that ongoing tensions could increase and negatively impact Chinese stocks,” NEPC said in its report.
Moore said the change is good for everyone involved.
“This decision is in the best long-term financial interests of those individuals who choose to invest in a SMART529 Select Plan and the children whose educational future benefits from these funds,” he said.
This isn’t the first time Moore has spoken out against dealing with China. In 2021, he led a group of 15 state financial officers in targeting banks that boycott coal, oil and gas industries, specifically mentioning China.
“Woke capitalists and globalist actors have been using the guise of climate change to press for anti-American reforms that reduce our country’s competitiveness against hostile nations like Russia and China,” Moore told The West Virginia Record then. “As a result, in less than a year our country has gone from energy independence to having a president who is begging OPEC and Russia to pump more oil.”
