As CIT Market Expands, More Get Coveted Tickers

Hand Benefits & Trust Co. has gone live with more than 30 collective investment trust (CIT) tickers and associated CUSIP numbers via the Nasdaq Fund Network.

David Hand, CEO of Hand Benefits & Trust, tells PLANADVISER that his firm is excited and optimistic about ongoing growth in the CIT space. He says he expects the expanding use of tickers and CUSIPs for CITs will help to dispel some of the myths that have held back growth in the efficient and cost-effective investment vehicle.

With the new Hand Benefits & Trust Co. CIT tickers, there are now more than 350 CIT tickers on the Nasdaq Fund Network. The 31 newest cover 22 different funds operated by 11 asset managers. These managers are BlackRock, ClearBridge, Western Asset Management, QS Investors, Brandywine Global Investment Management, Royce Investment Partners, Jensen Investment, DSM Capital Partners, Decatur Capital, Snyder Capital and Disciplined Growth Investors.

Hand says financial advisers are warming to the opportunity they have when it comes to incorporating CITs into their own practice.

“We all know that CITs tend to have lower costs relative to mutual funds, but really the compelling advantage of a collective trust from the adviser’s perspective is that it actually has better performance than a mutual fund, because it’s not subject to flows in the same way,” Hand explains. “We’ve clearly seen the impact that outflows can have on performance over the last few months. Because the flows are more stable, CITs simply have better benchmark tracking performance, and they also benefit from the fiduciary commitment of providers.”

Hand says progressive advisers are using CITs as the building blocks for innovative fund-of-funds products offered to their retirement plan clients. They are reaping excess performance for their clients not only from the pricing efficiency of CITs, but also from the aforementioned fact that CITs aren’t subject to the same patterns of inflows and outflows as publically available mutual funds, making them more efficient overall.

“For example, they are building CIT TDFs [target-date funds] with annuities and different glide paths—all sorts of fund-of-funds can be design using CITs as the building block,” Hand adds.

Devin McCarthy, managing director of the Nasdaq Fund Network, echoes Hand’s comments and suggests that the CIT marketplace will likely continue to expand as transparency improves. He expects that the mid- and small plan segment is where the greatest CIT growth can be expected.

“The mid- and small-sized plan market continues to be largely intermediated by financial advisers,” McCarthy explains. “These advisers know a lot about mutual funds and other pooled investment vehicles, but they may not be fully familiar with CITs. We expect that tickers and CUSIPs will really help to normalize and validate the use of CITs among this community.”

McCarthy suggests that CITs are about as well understood right now as mutual funds were back in the 1980s.

“People may not recall, but when mutual funds first started to become very popular in the 1980s, the performance and cost information was a lot harder to find,” he explains. “Nasdaq created a centralized registration service providing tickers to all US mutual funds—the Nasdaq Fund Network. Today, mutual funds are in a different world of transparency and access to information. We are working to make sure CITs follow that path, and we expect that CUSIPs for CITs will become table stakes sooner rather than later.”