NEPC’s Bill Ryan is quoted in this PLANADVISER article discussing the rapid growth of collective investment trusts (CITs)—particularly how small plan adoption is fueling their rise—and why lower fees are a key driver. Visit PLANADVISER to read the full article.
Collective investment trusts now hold nearly 30% of DC plan assets, rising from just 13% a decade ago; experts predict it won’t be long before they overtake mutual funds’ role in the defined contribution market.
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“There are [several] macro factors driving [CIT] adoption,” says Bill Ryan, a partner and defined contribution team leader at NEPC. “No. 1 is lower fees for CITs relative to [fees for] 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,” Ryan explains.
He adds that asset managers now prefer CITs because there are fewer cost burdens and less friction associated with the structure. That’s why small plans are catching on, he says.
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Usually, however, problems such as a recordkeeper lacking the right subscription documents for a new CIT or share class can slow down the transition process by “weeks, not months or years,” Ryan says.
“If there was a wrinkle, … it’s akin to what mega plans had 15 or 20 years ago,” he says. “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.”
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