Certain Wilmington Trust Collective Investment Trust fact sheets are intended for institutional use only and may be used only by retirement plan sponsors, their consultants, and advisors. These fact sheets are labeled for institutional use only. All other fact sheets on this site may ultimately be used by retail investors. Collective investment trusts are available only to certain retirement plans which meet eligibility requirements and are not available to the general public. The fact sheets are not intended for use by the general public or to provide investment advice or recommendations, nor are they an offer or solicitation to the general public to buy or sell any investment products. If you agree to the terms above, select Continue.
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Collective Investment Trusts (CITs)
What is a Collective Investment Trust (CIT)?
CITs are pooled, tax-exempt investment vehicles sponsored and administered by a bank or trust company that also acts as the trustee.
CITs pool assets from qualified retirement plan investors into one private investment portfolio with a specific strategy. Currently, CITs are available for defined contribution (DC) and defined benefit (DB) plans, excluding most 403(b), 457(b), and 457(f) plans. They are not currently permissible investment vehicles for individual retirement accounts (IRAs).
CITs are subject to review and oversight by various government agencies. They are not registered under the Securities Act of 1933 or the Investment Company Act of 1940. The Office of the Comptroller of the Currency and/or state banking regulators serve as the primary oversight for the vehicle. Additionally, the sponsoring trustee of a CIT, a bank or trust company, is committed to acting in the best interest of unit holders because it is bound by the fiduciary standard under the Employee Retirement Income Security Act of 1974 (ERISA).
Investing in a CIT
The logistics of investing in CITs are quite different from investing in mutual funds.
In addition to the usual requirements (understanding the investment characteristics, the role it will play in the plan’s overall portfolio, and the anticipated value it provides compared to the fees charged) CIT selection requires the plan sponsor to sign a participation agreement adopting the CIT trust agreement. Investments managed within CITs are governed by ERISA fiduciary rules, including the duties of prudence and loyalty. Meaning, the CIT trustee has direct fiduciary accountability to each plan sponsor and their fiduciaries with respect to the plan assets invested in the CITs.
How can CITs Benefit Plans?
- The sponsoring trustee of a CIT, a bank or trust company, is committed to acting in the best interest of unit holders.
- CITs include only qualified retirement plans as investors, so CITs are designed exclusively to meet the needs of tax-exempt investors.
- CITs can offer some of the same high quality investment strategies available in mutual funds at generally lower cost.
CITs Available1
(Trusteed by Great Gray Trust Company, LLC and managed by Transamerica Asset Management, Inc.)
*When choosing to view a factsheet below, you will be redirected to an external website.
| Class I | Class II | ||
|---|---|---|---|
| Transamerica International Growth CIT | VIEW | VIEW | |
| Transamerica International Stock CIT | VIEW | VIEW | |
| Transamerica Large Cap Growth CIT | VIEW | VIEW | |
| Transamerica Large Cap Value CIT | VIEW | VIEW | |
| Transamerica Mid Cap Growth CIT | VIEW | VIEW | |
| Transamerica Small Cap Growth CIT | VIEW | VIEW | |
| Transamerica Small Cap Value CIT | VIEW |
Learn More: Why are CIT Adoptions Increasing?
In recent years, several forces have combined to create an environment in which CITs offer meaningful benefits to advisors and consultants, plan sponsors, and participants.
One of the most influential forces in the DC market is acute fee pressure. This proverbial “race to the bottom” is reflected in the downward trend of both plan investment fees and administration costs. The current focus on reducing fees assessed to participants aligns with an increased emphasis on the obligations of a fiduciary, including assessing “fee reasonableness.” This is relevant to an investment vehicle discussion because plan fiduciaries have a responsibility to be aware of their purchasing power. Pricing inefficiencies across investment vehicles and share classes can be material.
DC Market Favors CIT Adoption
In general, CITs have lower administrative, marketing, and distribution costs versus other investment vehicles. CITs still have reporting requirements that are addressed via quarterly factsheets and fund declarations. Additionally, given the tax-exempt status of the trust, portfolio managers are able to manage the portfolios by taking advantage of benefits that are similar to those that participants gain in a 401(k) plan. As an example, the sale of a low-cost-basis stock in the CIT portfolio would not trigger a pass-through of long-term capital gains to the investors. Share class structures inside CITs allow for trustees and asset managers to take into consideration the size of plans’ investments in a fund(s), and the size of consultants’ or advisors’ assets in a fund(s) when the fee structure is created.
IMPORTANT INFORMATION
CITs are for institutional Use only. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.
1 Great Gray Trust Company, LLC Collective Investment Funds (“Great Gray Funds”) are bank collective investment funds; they are not mutual funds. Great Gray Trust Company, LLC serves as the Trustee of the Great Gray Funds and maintains ultimate fiduciary authority over the management of, and investments made in, the Great Gray Funds. Great Gray Funds and their units are exempt from registration under the Investment Company Act of 1940 and the Securities Act of 1933, respectively.
Investments in the Great Gray Funds are not bank deposits or obligations of and are not insured or guaranteed by Great Gray Trust Company, LLC, any bank, the FDIC, the Federal Reserve, or any other governmental agency. The Great Gray Funds are commingled investment vehicles, and as such, the values of the underlying investments will rise and fall according to market activity; it is possible to lose money by investing in the Great Gray Funds.
Participation in Collective Investment Trust Funds is limited primarily to qualified retirement plans and certain state or local government plans and is not available to IRAs, health, and welfare plans and, in certain cases, Keogh (H.R. 10) plans. Collective Investment Trust Funds may be suitable investments for plan fiduciaries seeking to construct a well-diversified retirement savings program. Investors should consider the investment objectives, risks, charges, and expenses of any pooled investment fund carefully before investing. The Additional Fund Information and Principal Risk Definitions (PRD) contains this and other information about a Collective Investment Trust Fund and is available at www.greatgray.com/principalriskdefinitions or ask for a copy by contacting Great Gray Trust Company, LLC at (866) 427-6885.
Great Gray and Great Gray Trust Company are service marks used in connection with various fiduciary and non-fiduciary services offered by Great Gray Trust Company, LLC.
Transamerica Asset Management, Inc. (TAM) is an SEC registered investment adviser for the collective investment funds (“CITs”) and for which Great Gray Trust Company, LLC is trustee and maintains ultimate fiduciary authority over. TAM provides asset management, fund administration and shareholder services for institutional and retail clients. TAM is an indirect wholly owned subsidiary of Aegon Ltd., an international life insurance, pension, and asset management company.
© 2023 Transamerica Corporation. All Rights Reserved.
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