Keep Up With the Growth in CITs — Get the Talking Points

Collective Investment Trusts, or CITs, in 401(k) plans continue to grow in popularity. CITs made up 38% of 401(k) assets in 2023, according to a Cerulli Associates report.* That’s only slightly less than mutual funds, which made up almost 40% of 401(k) assets, according to the same report.

As you help clients build their retirement plan investment lineup, consider the benefits that CITs can offer them. The tax-exempt, pooled investment vehicles offer benefits similar to mutual funds — but at a lower cost. Because CITs are maintained by a bank or trust company, lower regulatory and marketing requirements contribute to the lower cost.

Here's another reason to become familiar with the benefits of CITs. They’re currently only available in qualified retirement plans, but they may become available in 403(b) plans if Congress passes legislation in 2025.

Follow these talking points about CITs in your next client meeting:

CITs Are a Cost-Effective Way to Gain Customized Investment Solutions

A top priority for plan sponsors is improving the quality of their plan’s investment lineup, according to Cerulli Associates.* In 2023, 29% of plan sponsors said they’d specifically like more opportunities for personalization and customization in the plan. CITs offer customization at the investment level and allow for portfolios to be rebalanced frequently.

CITs Give Plan Sponsors Access to Alternative Investment Strategies

With greater investment flexibility than mutual funds, CITs can structure risk and investment management to meet the goals of a plan. For example, CITs can invest in stable value investments that offer a historically higher yield than money market funds. They can also invest in these alternatives:

• Treasury inflation-protected securities, or TIPS
• Real estate
• Commodities
• High-yield bonds
• Hedge funds

Through CITs, small and medium plans can access nontraditional investment strategies that may not be available otherwise.

CITs Offer Solutions for Even the Smallest Retirement Plans

Fees associated with CITs are generally lower compared to mutual funds, and smaller plans can benefit from institutional-level pricing. Lower overhead expenses and regulatory costs contribute to the cost-effectiveness of CITs. Oversight by both the Department of Labor and state banking regulators, meanwhile, provide assurance that the trust adheres to strict fiduciary standards and comply with banking laws.

New CIT Offering

The Standard now offers the OnTrack American Funds Target Retirement Series. These CIT target date funds consist of actively managed American Funds mutual funds with an allocation to the Standard Stable Asset Fund. We also offer the OnTrack State Street CIT.

To learn more about The Standard’s CITs, contact your representative.