Pricing aside, the investment experience between a mutual fund and CIT is substantially similar. But, there are notable differences in the participant experience. Here, we walk through those differences and participant outreach considerations when making the switch from a mutual fund to CIT.
When you hear the acronym “CIT” what do you think of? “Crisis Intervention Team”? “Career Institute of Technology?” I’m immediately taken back to my first job as a Counselor in Training at a children’s day camp. A now-faded navy blue t-shirt with the letters C-I-T printed on the back still sits in my closet.
I’ll bet if you ask the average defined contribution plan participant what a CIT is, she’d be unlikely to tell you that it’s a collective investment trust – a pooled investment vehicle owned by a bank or trust offered only through qualified employer-sponsored retirement plans.
Originally created in 1927, the CIT is only three years younger than its cousin, the mutual fund, but tends to be lesser known to individual investors despite being offered in 75% of defined contribution plans.1The most reasonable explanation for this may be simply that information on CITs isn’t publicly available or easily searchable. Mutual funds, by comparison, are regulated by the Securities and Exchange Commission (SEC) and are offered publicly in the retail and institutional markets. With the search of a ticker symbol, things like investment objectives, strategies, risks and performance can be easily rendered. Meanwhile, CITs do not have a prospectus, but different governing documents such as a declaration of trust and investment operating guidelines which are written for, and made available to, institutional investors – that is, the DC plan sponsor. Needless to say, obtaining information about your CIT isn’t as simple as going to Google and typing in a ticker symbol. But there are ways plan sponsors and their recordkeepers can help ease the participant experience with CITs – especially if they were previously used to mutual funds.
Easing the participant experience around the implementation of CITs in your plan is not as hard as it might seem. Despite the notable differences mentioned here, CITs and mutual funds are very similar and plan sponsors can lean on their service providers for assistance with outreach and education to ensure a positive experience for plan participants.
As for my days as a camp Counselor in Training, I never did make it to full counselor…a fact I’m reminded of dozens of times daily when I hear the acronym CIT. Such is life.
1Callan, 2019 Defined Contribution Trends Survey
2State Street Global Advisors. Participant Engagement Survey, 2021, survey of 1,072 savers between March 25, 2021 and March 30, 2021.
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5054470.1.1.AM.INST Exp. Date: 10/31/2023