Collective Investment Trusts continue their comeback, with Cerulli Associates noting that recent growth in CIT assets can be attributed to increasing demand for lower-cost vehicle options.
The Boston-based research and consulting firm, in partnership with the Coalition of Collective Investment Trusts, recently found that 92 percent of asset managers offering CITs cite demand for lower-cost options was “very important” in the reasoning behind their development of the vehicle.
“So, it is not surprising that when managers were asked about how their pricing for CITs relates to other vehicles, 92 percent respond that their CITs are less expensive than their mutual funds,” Cerulli added.
Conversely, it found that mutual fund assets crashed 6.4 percent in October, falling to $14.4 trillion. Net negative flows totaled $34.7 billion for the month, the third straight month of outflows.
Additionally, October owns the single-largest monthly net negative flow figure for 2018.
The news follows an earlier Cerulli CIT report that found collective investment trusts grew sharply in 2016. It pegged assets in CITs at $2.8 trillion, representing an 11.6 percent annual increase, which fueled additional interest (and investment) throughout 2017 and into the beginning of 2018.
“In today’s highly competitive marketplace, defined contribution plan mandates can be won or lost by the difference of a few basis points,” Jesscia Sclafani, Director, Retirement at Cerulli, said upon the release of the earlier report.
Together, mutual funds and CITS hold close to three-quarters of 401k plan assets, making them the most widely used investment vehicles for 401k plans, according to the report.
“Mutual funds consistently represent greater than half of total 401k plan assets,” she added. “The next-largest investment vehicle by 401k plan assets is CITs, which hold almost one-fifth of total 401k plan assets.”