Passive investment assets in mutual funds and exchange-traded funds will surpass active ones by early 2024, according to research released. This shift highlights the increasing popularity of passive investment strategies, particularly through collective investment trusts (CITs). CITs have gained traction as a cost-effective and flexible investment option for investors seeking long-term growth.
A new bill introduced in Congress would allow 403(b) plans maintained by tax-exempt organizations to make use of collective investment trusts. Currently, these plans are limited to investing in mutual funds. This proposed legislation aims to provide more investment choices and potentially lower costs for participants in 403(b) retirement plans.
Asset growth of collective investment trusts (CIT) continues to chip away at mutual funds' dominance, as defined contribution (DC) plan sponsors recognize the advantages of CITs. DC plan sponsors are increasingly turning to collective investment trusts instead of mutual funds due to their lower costs, flexibility, and potential for higher returns. This trend indicates a shift towards more efficient and diversified investment options within retirement plans.
A House bill would let 403(b) plans invest in collective trusts, expanding the investment options available to tax-exempt organizations. The Retirement Fairness for Charities and Educational is a bipartisan legislation that aims to enhance retirement plan choices for employees in non-profit and Educational institutions. If passed, this bill would provide tax-exempt organizations with greater flexibility in managing their retirement investment portfolios.
Providers of collective investment trusts are expected to target midsize and large DC plans in the coming year. As CITs gain popularity and recognition for their cost-effective and flexibility, investment management firms are increasingly focusing on capturing a larger share of the defined contribution plan market. This trend aligns with the growing demand for innovative and efficient investment solutions within retirement plans.
In response to the rising demand for collective investment trusts, investment management solutions provider Spouting Rock Financial Partners has launched a separate retirement division. This specialized division aims to cater specifically to the needs of retirement plan sponsors and participants, offering tailored investment strategies and solutions. The launch of this division demonstrates the industry's recognition of the importance and potential of collective investment trusts in the retirement market.
Jock McCormack of DLA Piper Australia provides an update after the issuance of a draft ruling on the operation of a new investment vehicle. The draft ruling aims to clarify the regulatory framework surrounding collective investment trusts, ensuring compliance and transparency in their operations. This update reflects the ongoing efforts to establish clear guidelines and regulations for the growing collective investment trust industry.
A bill that would allow 403(b) plans to invest in collective investment trusts (CITs) could be headed for Congressional markup in the next few months. This bill seeks to expand investment options for retirement plans maintained by tax-exempt organizations, providing participants with additional choices and potentially improving their retirement outcomes. The potential approval of this bill would further strengthen the role of CITs in the retirement investment landscape.
Overall, the rise of collective investment trusts signals a growing preference for passive investment strategies and the recognition of their benefits compared to active investments. With the potential for lower costs, greater flexibility, and improved returns, CITs are poised to overtake mutual funds in passive investment assets by 2024. This trend highlights the industry's ongoing efforts to provide more efficient and diverse investment options within retirement plans.
