Collective Funds the Future of 401ks?
PHOENIX, AZ, July 16, 2007 -- With a wealth of investment products available for retirement plans in the marketplace, one in particular is proving to be a very popular choice. According to a new white paper authored by AST Capital Trust Company, collective funds are experiencing increasing interest from defined contribution plans, including 401k plans.
The white paper provides an overview of collective funds and examines some of the more attractive features of collective funds, including:
Ease of Use
Many collective funds are now traded on a daily basis to meet the needs of 401k plans.
Operational Expenses
Cost is certainly a key factor for plan sponsors when considering funds. Since collective funds are designed for investment only by qualified plans, they are not subject to those expenses associated with servicing retail clients. Accordingly, collective funds often have lower expenses.
Increasingly Attractive Alternative to Mutual Funds
In addition to the potential for lower investment expenses, the administrative challenges associated with using mutual funds within 401ks, including short-term trading restrictions, redemption fees and Rule 22c-2, have contributed to plan sponsors seeking alternatives to mutual funds.
"It is no surprise that the popularity of collective funds has grown over the past few years," says Steve Ferber, Executive Vice President of Collective Fund Services at AST Capital Trust. "They often offer institutional investors a low-cost, flexible alternative to mutual funds. With the continuing market demand for lower-fee and more flexible products, the future looks very promising for collective funds."
In addition to operational advances, the growth in collective funds has coincided with an expansion in the capabilities of the National Securities Clearing Corporation’s Fund/SERV® platform which has enabled collective funds to be seamlessly traded, like mutual funds, in 401k plans.
"Institutional funds, like collective trusts and separate accounts, are increasingly popular with mid- and large-sized employers as they are significantly less expensive than mutual funds," says Pamela Hess, Director of Retirement Research at Hewitt Associates. She adds, "A seemingly small number of basis points saved over time can lead to meaningful differences in participant savings."
For a copy of the full white paper please email sally@blisspr.com
About AST Capital Trust Company
AST Capital Trust Company is a Delaware State chartered trust company with operations in Wilmington, DE and Phoenix, AZ. An affiliate of American Stock Transfer & Trust Company, the country’s largest independent stock transfer company, AST Capital Trust was originally chartered in 1900. The company provides directed trustee, trust administration and back-office services to retirement plans, individuals, families, companies, foundations, organizations and financial institutions. AST Capital Trust works exclusively with professional advisors to help end-clients achieve financial goals by utilizing trust strategies and the benefits of Delaware law. AST Capital Trust is one of the largest independent trust companies in the U.S. and administers over $21 billion in trust assets. For more information please visit www.astcapitaltrust.com.
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