What are Collective Investment Trusts (CITs)

Many retirement plans are adding collective investment trusts, or CITs, as a way to lower investment costs to participants. While these are not new investment vehicles, they are becoming more prominent in retirement plans. Check out our Frequently Asked Questions (FAQ) to learn more about these investments that may start showing up in your retirement plan.

What are collective investment trusts, or CITs?

Collective investment trusts (“CITs”), also known as collective trusts, commingled funds, or common trust funds, are institutional investment vehicles that can be offered in retirement plans – 401(k), 401(a), “Taft-Hartley”, and government 457(b) plans only.

CITs are sponsored by a bank or trust company, unlike mutual funds, they are not registered with the Securities and Exchange Commission (SEC) and may not have a ticker symbol.

How are CITs similar to mutual funds?

CITs are daily valued pooled accounts that have a stated investment objective and investment strategy, including active and passive strategies ranging from fixed income to equities. 

How are CITs different from mutual funds?

Typically, a CIT is created to mirror the investment strategy of a publicly traded mutual fund but because they are only available to institutional investors, they have some advantages.

CITs generally keep lower cash balances than mutual funds because they are only available to institutional investors with longer investment horizons than retail clients, and cash flows in and out of the trust are more predictable.  These factors can help reduce cash flow volatility and allow the portfolio to be managed more efficiently and be more fully invested than a mutual fund by not having to hold large cash positions to meet redemptions.

Are there cost advantages to CITs?

Fees and expenses of CITs are generally lower than their mutual fund counterpart because they are exempt from registration and filing requirements of the SEC, therefore, CITs can have lower oversight and administrative costs.

Additionally, larger retirement plans are often able to negotiate favorable fee structures based on their plan assets, unlike in a mutual fund which has a set expense ratio.

Where can I get information about a CIT in my retirement plan?

In general, your retirement plan provider will provide a fact sheet with pertinent information about the CIT strategy on the retirement plan website, as well as the daily price and value of your account.

Can I invest in a CIT in my personal accounts?

No. CITs are only available to institutional investors, like a retirement plan. 

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