NEPC’s Bill Ryan recently spoke with PLANSPONSOR about the growing adoption of Collective Investment Trusts (CITs), noting how fee transparency and evolving plan design are driving greater accessibility for smaller plans. Read the full article on PLANSPONSOR or read excerpts below.
The retirement security of millions of working Americans is becoming increasingly reliant upon an asset structure that is likely less familiar than its ubiquitous counterpart, but powerful to many.
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“There are [several] macro factors driving [CIT] adoption,” says Bill Ryan, partner and defined contribution team leader at NEPC. “Number one is lower fees for CITs relative to mutual funds.”
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“For a while, mutual fund companies either didn’t have a CIT to provide to small plans, or priced it in a way that you had to have over a certain asset level to access CITs—so that CITs didn’t cannibalize their mutual fund business,” explains NEPC’s Ryan.
He adds that asset managers now prefer CITs because there is less friction and fewer cost burdens associated with the structure. That is why small plans are catching on, he says.
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NEPC’s Ryan adds that usually, however, problems such as a recordkeeper not having the right subscription documents for a new CIT or share class can result in the slowing down the transition process by “weeks, not months or years.”
“If there was a wrinkle … it’s akin to what mega plans had 15 or 20 years ago,” says Ryan. “It’s new, it’s different, so you just need to explain that you’re getting the same stocks in both portfolios … you’re just getting different wrapping paper.”
Click here to read the full article on the PlanSponsor site.