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Collective Investment Trusts Gain Momentum in Retirement Plans

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Target-date-fund collective investment trusts see growth in assets.

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Collective investment trusts (CITs) are becoming an increasingly popular option for retirement plan sponsors looking to provide cost-effective and flexible investment solutions for their participants. According to Morningstar's target-date strategy landscape report, CITs continue to accumulate assets, particularly in target-date funds.

One area where CITs are gaining traction is in the enhancement of 403(b) plans. The section on the enhancement of 403(b) plans includes language that would amend federal securities laws to allow 403(b) plans to invest in CITs, providing more investment options for participants.

DC plan sponsors are also turning to CITs instead of mutual funds for their lower costs, flexibility, and potential for better performance. This shift is evident in a new bill introduced in Congress that would allow 403(b) plans maintained by tax-exempt organizations to make use of CITs.

While CIT-based target-date products were expected to overtake mutual funds in 2023, the growth has been slower than anticipated. However, the trend towards CITs continues to gain momentum, with more plan sponsors recognizing the benefits of these investment vehicles.

Beutel, Goodman & Company Ltd. recently announced a partnership in the CIT space, further highlighting the growing interest in these investment options. Mutual funds may have narrowly maintained their lead over CITs, but the faster growth of CITs suggests a potential shift in the retirement plan landscape.

Pictet Asset Management has also entered the CIT market, launching a suite of four CITs in the US. This move further solidifies the importance of CITs in the investment industry and underscores the demand for these products among plan sponsors and participants.

Overall, the rise of CITs in retirement plans signals a shift towards more cost-effective and flexible investment options for participants. With the potential for better performance and lower costs, CITs are likely to continue to grow in popularity among plan sponsors and participants alike.

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collective investment trustsretirement plans403(b) planstarget-date fundsmorningstarmutual fundscost-effectiveflexibleperformanceinvestment options

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