Collective investment trusts are still climbing—both in use and in offerings.
UBS Asset Management Trust Company and Morningstar, Inc. announced that their collaboration on a UBS series of target-date collective investment trust funds (CITs) that seek to track the performance of the Morningstar Lifetime Allocation Indexes has attracted two large corporate defined contribution plan clients in their first six months, gathering $2.4 billion in assets.
And Northern Trust has launched what it's termed a new-generation target-date solution: Life Engineered Funds, which are collective trust funds maintained by Northern Trust Investments, Inc. as trustee.
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The funds, according to Northern Trust, combine the firm's factor-based Engineered Equity strategies and PIMCO's active fixed-income and inflation-sensitive strategies.
CITs are mutual fund-like institutional funds with appreciably lower costs than traditional mutual funds, because they are not regulated by the Securities and Exchange Commission and have fewer disclosure requirements and costs.
Their growth in the retirement marketplace has been substantial, with plan sponsors increasingly focusing on costs. At the end of 2013, according to Morningstar, they held $1.2 trillion in institutional retirement assets—and in 2014, 60 percent of plans offered a CIT.
CITs had been issued by banks or bank trust companies, and the competition they spurred for available retirement plan dollars has led fund companies to sit up and take notice even as offerings have expanded.
The Life Engineered Funds, for example, are, according to Northern Trust, "available to defined contribution retirement plan sponsors in 12 collective trust funds, designed for participants who are retired or are planning to retire between now and 2060.
Each fund includes a combination of three distinct strategies: growth, income and inflation sensitive."
CITs have gotten a major push in the past year thanks to the outcome of two large settlements in 401(k) excessive-fee cases. In the settlement papers for both Lockheed and Ameriprise, there were stipulations that the sponsors "consider the use of collective investment trusts" in plan design.
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