The popularity of collective investment trusts (CITs) in defined contribution retirement plans is increasing dramatically, according to a new report by Celent.
Investments in CITs rose from $400 billion to $900 billion in 2010, and are projected to hit $2 trillion by 2015, the report said.
In the past, CITs’ popularity has been hindered by a lack of transparency
, according to Alexander Camargo, author of the report. However, CITs are now on the National Securities Clearing Corporation’s settlement platform, and are tracked in the same was as mutual funds, he said.
Like mutual funds, CITs allow clients to collect assets into portfolios that feature specific strategies; however, they are only available through 401(k)s
and are not sold directly to retail investors, Camargo said.
In addition, CITs are exempt from registration with the Securities and Exchange Commission and face fewer trading restrictions than mutual funds, he said.
At the end of 2010, defined contribution plans had $4.5 trillion in assets, or 24.8 percent of the total U.S. retirement market, the report said.
Celent projects that defined contribution plans
will accumulate between $5.7 trillion and $6.2 trillion by 2015.
“The growth of mutual funds and of CITs is coming at the expense of DC assets in company stock, separate accounts, and variable annuities,” the report said.