what is Collective Investment Trust (CIT)

Collective Investment Trusts (CITs) are institutional investment structures that pool money from multiple investors to create a diversified portfolio with a specific investment strategy. Here's a detailed analysis of CITs: 1. **Regulatory Environment**: CITs are not regulated by the SEC like mutual funds but are primarily regulated by the Office of the Comptroller of the Currency (OCC) or state banking regulators. This places CITs in a legal gray area, operating more akin to hedge funds than traditional mutual funds. 2. **Investor Accessibility**: CITs are available only to qualified retirement plans, such as 401(k) defined contribution plans and governmental plans, not to individual investors. This restricts access to a select group of investors, typically through employer-sponsored retirement plans. 3. **Economies of Scale**: CITs aim to lower costs through economies of scale by combining the funds of multiple investors into a single portfolio. This approach allows for more efficient management and reduces the cost per investor. 4. **Investment Strategies**: CITs offer a range of investment strategies, including target date vintages and strategies for guaranteed lifetime income. This variety caters to different risk profiles and investment objectives within the qualified retirement plan ecosystem. 5. **Operational Flexibility**: CITs can leverage a broad scope of investment types and are often associated with lower operational expenses compared to mutual funds. This flexibility allows them to adapt to market conditions and investor needs more effectively. In conclusion, Collective Investment Trusts (CITs) represent a unique investment vehicle that operates outside the traditional mutual fund framework. They offer a cost-effective, diversified investment option tailored to the needs of qualified retirement plans, with strategies designed to meet specific financial goals.