If you can get the same investment in a cheaper CIT wrapper, why not offer it up to plan sponsor clients, especially in the current fiduciary frenzy?
It’s a vexing question put to Nuveen, who recently released their Nuveen TIAA Lifecycle Blend CIT series.
“We’re seeing steady growth in it,” says Brendan McCarthy, DCIO national sales director at Nuveen, when specifically asked about CIT awareness and adoption. “There’s still a population out there that is predominantly mutual funds. When you get down the smaller end of the market, I don’t know that that will necessarily change. I think the decision on whether it’s a CIT or mutual fund depends on the plan.”
Most 401k advisors and specialists in the “higher end of the market” are by now are familiar with see CITs and make the CIT or ’40 Act decision based on a particular plan’s need, he adds, and it’s especially relevant in the previously mentioned fiduciary environment.
“This heightened fiduciary focus and awareness on the part of plan sponsors and their advisor consultants is not going away,” McCarthy argues. “We’re seeing that continued trend where they’re reevaluating the target date slot, particularly the QDIA default vehicle, and doing what we call the reevaluate, replace and reenroll. That reevaluation continues to be a big driver of growth.”
The latest CIT launch, released last week, is meant to offer more choice.
“We currently have two target-date series; all-active lifecycle funds and then all-passive target date which is our lifecycle index funds,” explains Jeff Eng, managing director and head of retirement products at Nuveen. “It was really due to market demand where, off-platform, we were getting a lot of advisors and consultants asking us, ‘Hey, you have this award-winning all active series and all passive series. It’ll be great if you guys have a blend in terms of an active-passive series.’ They have a lot of clients who like active management, but they’re concerned about the fees. They were seeing more and more clients asking about and potentially utilizing blended target data series.”
Direct real estate
It employs that same glide path the firm’s all-active target-date series and includes an allocation to the firm’s direct real estate fund.
It also means several moving parts, which could lead to confusion. Does it make it difficult to explain in the marketplace?
“No,” McCarthy says with a laugh. “We’re fortunate that we’re in our fourth year of double-digit sales growth in DCIO, and that’s been led by our target-date funds. We’ve got a five-star active and a five-star passive and now we’re adding in a blended strategy in between the two of them.”
Direct real estate, specifically, is something that’s “gone over very well with advisors and with plan sponsors.”
“Historically, that is an asset class that has only been available to institutional investors, and we’re able to take that in a ‘40 Act fund, and we’re actually the only ‘40 Act target-date series that can offer direct real estate out to the end investor inside their target-date funds,” McCarthy says. “It’s something that can really help dampen the volatility through those tumultuous times and give an overall smoother ride and an overall better participant experience.”
A focus on outcomes, the end-user and a “better participant experience” is, of course, driving much of the innovation and growth currently seen industrywide, a reason for Nuveen’s announcement.
“The reason that we did it in a CIT series was that the market demand we saw was specifically off-platform,” Eng concludes. “It wasn’t coming from you know our typical institutional clients. CITs are becoming more and more prevalent within the 401k space. So, we decided that the best vehicle structure to being able to offer it, since most of the demand we were getting for a blended active/passive target CIT series was in the 401k market.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
