Managers cut fees to retain lucrative college plans

* TIAA-CREF wins renewals in 3 states YTD, picks up Oregon

* Fee concessions after 2008 market slide

* Home state advantage a factor?

By Ross Kerber

BOSTON, Nov 6 (Reuters) - Money management companies, anxious to hang on to lucrative contracts to manage college savings plans, are making concessions to keep the business from slipping away.

Seven of eight states that have signed contracts this year have chosen the firms that were already managing these plans -- in many instances, receiving sizable cuts in fees.

"There is a lot of money in these plans and companies don't want to lose them, so they're willing to be as aggressive as they need to be," said Andrea Feirstein, a New York consultant to state officials in the $100 billion industry.

In all more than $9 billion stayed in the same hands, in a year when expectations for turnover were high given recent market volatility and disappointing returns.

Education investment giant TIAA-CREF re-signed deals this year with Vermont, Minnesota and Kentucky. Fidelity Investments scored a renewal with its home state of Massachusetts and picked up Arizona. Upromise Investments, the college-savings unit of SLM Corp (SLM.N), said it recently renewed deals with Nevada and Colorado.

But to keep the business, fund firms have launched a price war. In Vermont, TIAA-CREF slashed fees on its popular Managed Allocation option to 53 basis points from 80 basis points.

SOUR RETURNS SHARPEN SCRUTINY OF COSTS

In some states firms including Fidelity and Upromise have cut fees even when they did not have to, to stay in regulators' good graces and to win more customer accounts.

Overall, fund data specialist Morningstar Inc estimates that the so-called 529 plans charge an average of 85 basis points nationally, down from more than 100 basis points as recently as two years ago.

In that time complaints over costs have piled up, and on-line comparison shopping has gotten easier for parents.

"What pricing looked like eight years ago versus today, a lot has changed," said Peter Angus, senior vice president for Upromise, which cut fees this year in New York, Iowa and elsewhere.

The 529 plans are named after the section of the IRS code that created them in 1996. Sponsored by states, they offer federal tax benefits for money set aside to pay for a child's college education.