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Acceptance Building for Collective Investment Trusts and Liquid Alternatives

    

BOSTON, MA, October 14, 2016 -- New research from Cerulli Associates, a global research and consulting firm, finds that collective investment trusts (CITs) and liquid alternatives are gaining momentum for their potential to lower costs and reduce portfolio volatility, but obstacles still remain.

"With more than $2.5 trillion in assets as of year-end 2015, CITs have become an increasingly popular vehicle for institutional investors in both the defined benefit (DB) and defined contribution (DC) market places," states Chris Mason, senior analyst at Cerulli. "These vehicles serve as a viable alternative and potentially more cost-effective options for institutional investors to accomplish their investment goals."

Cerulli determines that plan sponsors, consultants, and recordkeepers are now more familiar with some of the basic operational attributes of CITs than in years past. CITs have a variety of unique characteristics that often can be misunderstood, leading many CIT managers to focus on efforts to increase awareness and education of the vehicle. Likely the biggest differentiator from mutual funds and exchange-traded funds (ETFs) is that CITs can only be used in qualified retirement plans (i.e., DB plans, and increasingly, 401k DC plans.)

Despite increased awareness and data availability on third-party platforms such as Morningstar Direct, issues still remain. "Many who work with CITs cite a variety of issues regarding the third-party data available on these funds," said Mason. "Since the data is self-reported and not mandatory, some firms choose not to report certain elements of their CITs. This lack of mandatory and homogeneous reporting creates difficulties for analysts seeking a comprehensive picture of the market."

Cerulli's fourth quarter 2016 issue of The Cerulli Edge - U.S. Institutional Edition explores the growing acceptance of CITs and liquid alternatives.

About Cerulli Associates

Headquartered in Boston with offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.

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