Collective investment trusts — funds operated by a trust company or bank that handle a pooled group of trust accounts — continue to grow in popularity as an alternative to mutual funds in 401(k) plans. At a workshop session Tuesday at the 2013 SPARK National Conference in Washington, DC, David Hand of Hand Benefits & Trust provided the latest numbers:
• $2.1 trillion in holdings
• 2,400 CIT funds
• 1,300 products (eliminating multiple share classes)
• on 16 major platforms
In the last year, Hand said, he’s seen more branding of CITs by investment management firms instead of banks. Hand participated in a panel discussion along with Trademark Capital’s Mary Patch and Jamie Breen of Horizon Fiduciary Services.
The advantages of CITs in a 401(k) plan include no redemption fees, no minimum initial deposit requirement and NSCC trading. In addition, Patch noted two more — ETFs as the underlying investment and a fiduciary relationship to participants. The latter is an important factor for a firm that wants to be able to provide advice to plan participants, Patch noted — an important part of Trademark’s business model. Her firm developed a 3(38) fiduciary service to complement their CIT offering, which launched in 2011.
Hand suggested five possible business models for advisors:
• advisor to the trust
• solicitor fee
• service fee
• eligible investment advice
• advisor branded
