Collective Investment Trusts

Since the 1930’s Collective Investment Trusts (CITs) were the most common investment alternative for qualified retirement plans. With the advent and popularity of 401k plans in the early 1980’s most plan sponsors began to offer mutual funds. The reason for the change from Collective Investment Trusts to mutual funds was because mutual funds were valued daily, as opposed to annually or quarterly for most CITs. Mutual funds could provide funds that would work efficiently on the modern daily valuation recordkeeping platforms. Participants in 401k plans were able to transfer funds and see their account balances every day.

Today mutual funds have their own problematic issues in qualified retirement plans including short- term redemption fees, inappropriate share classes, higher asset management fees and marketing expenses such as 12 b-1 fees. The truth is that some mutual funds set up their own CITs to offer in the qualified plan space because of their great advantages.

At Alta Trust Company, we establish and administer Collective Investment Trusts and provide daily valuations (NAVs). This ability allows us to partner with successful money managers to feature their unique investment strategies for all kinds of qualified plans and market them throughout the US. If you are an investment manager, consider some of the advantages of setting up your own Collective Investment Trusts.


Fortune 500 companies and large governmental plans have known for years how powerful and efficient Collective Investment Trusts are for delivering cost-effective investment options. Now retirement plan participants from both large and small companies can better secure their retirement goals with the use of collective investment trusts. It is particularly gratifying to be a part of that effort.
— Adam Ponder, Executive VP of Alta Trust

What We Offer

  • Set up in 60 days

  • Low establishment costs

  • More than competitive ongoing fees

  • Approved professional documents

  • Strike daily valuations (NAV)

  • CITs trade on NSCC - National Securities Clearing Corp

  • Access to the major recordkeeping and custodial platforms

  • Omnibus trading platform

  • Opportunity to feature your investment strategies to a national audience

  • Fact sheets

  • Fiduciary oversight

  • Choice of CIT custodian for trading

  • Graphic design for marketing materials

  • Marketing opportunities

 

Collective Investment Trusts FAQS


What is a Collective Investment Trust?

A Collective Investment Trust (CIT), also known as a Collective Investment Fund (CIF) or a Collective Trust Fund (CTF), is a bank maintained fund that is exempt from registration under the Investment Advisers Act of 1940.


What is the difference between a Collective Investment Trust and a Mutual Fund?

Both Collective Investment Trusts and Mutual Funds look and act very much alike. The main difference comes with the governing statutes and the regulatory bodies that provide oversight. Banking regulators, such as the OCC (Office of the Comptroller of the Currency) and state banking regulators oversee Collective Investment Trusts, while the SEC governs mutual funds.  Collective Investment Trusts are only available to qualified retirement trusts such as 401k, Profit Sharing, Defined Benefit and government retirement plans. CITs offer the same kind of diversification as a mutual fund but also add an additional layer of fiduciary protection.  CITs are also well known for offering a retirement vehicle that is much lower in cost than the typical mutual fund.  


Are CITs new?

No. CITs were first offered in 1927 and gained popularity in 1936 when Congress gave them tax exempt status. Until the 1980s they were the vehicle of choice for retirement plans due to their low costs. However, CITs were typically valued annually or semi-annually and with the emergence of daily valued 401k plans a daily valued vehicle was needed and mutual funds filled that role. CITs have begun to regain their popularity over the last several years as retirement plans are becoming more cost sensitive and because most CITs are now valued daily.


What is the NSCC?

The NSCC is the National Securities Clearing Corporation and it is the non-profit exchange that processes virtually every mutual fund and collective trust trade. The NSCC processes over 4 quadrillion fund trades per year.  By receiving an NSCC Cusip a Collective Investment Trust is available to trade with virtually any custodian in the United States.


What are the advantages of starting a CIT with Alta Trust?

CITs are low cost vehicles that give you access to $17 trillion in assets in the retirement marketplace. CITs are managed in omnibus so you can have thousands of retirement plans investing in your strategy and as the manager you only have to manage one account. On top of all that Alta Trust is one of a few companies in the country that dedicates itself to Collective Trusts. We have developed a cost effective way to establish and administer CITs that we feel every money manager in the country should at least think about.


Is it risky to start a CIT?

No, Alta Trust provides a platform that makes it easy and painless to set up a Collective Investment Trust.  We take care of all of the CIT establishment, ERISA compliance, IRS reporting and other compliance, so new Investment Managers can focus on their important roles of managing money and gathering assets.


How long does it take to set up a CIT?

It typically takes about two months to establish a CIT.  During that time important documents will be created including a Declaration of Trust, Participation Agreement, Investor Disclosure and Investment Policy Statement.  Alta Trust will work with the Investment Manager to set up a custody account, trading protocols, fund universe and marketing materials.  Alta Trust will obtain a cusip for trading on the NSCC (National Securities Clearing Corporation). 


What Benefits will I receive from setting up my own suite of CITs?

CIT sponsors receive numerous benefits including marketing advantages for providing lower cost and higher fiduciary funds.  Some advisors are able to aggregate asset classes of mutual funds and qualify for lower cost share classes.  Other managers are able to greatly improve the operational efficiency in their office, reduce overhead and focus more on client retention.  Advisors who have one or more model portfolios find that CITs provide a way to trade all of their strategies for all of their plans in a few accounts.  Moreover, advisors who are looking to establish a proven track record now have a daily NAV that provides a foundation for their performance.


Most retirement plans today in mutual funds, which generally provide the benefit of investment diversification. CITs offer the same kind of diversification as mutual funds but also add an additional layer of fiduciary protection. The advantage to the plan is that the manager of the CIT’s investments owes a fiduciary obligation to the plan in how it manages the securities owned by the trust and is subject to limitations on how it can get paid. But this fiduciary protection does not apply to plans investing in mutual funds. In fact there is a special exemption under ERISA specifically exempting mutual fund advisers as fiduciaries to investing retirement plans. See ERISA sections 3(21)(B) & 401 (b)(1).
— Bruce Ashton, ERISA Counsel, Drinker, Biddle & Reath