Seven keys to evaluating collective investment trusts
September 26, 2025
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3 min
Collective investment trusts (CITs) are playing an increasingly active role in defined contribution (DC) plans. As consultants, plan sponsors, and financial advisors aim to optimize participant outcomes while managing fiduciary duties, clear and actionable guidance is essential.
The following seven best practices on how to effectively evaluate and oversee CITs are designed to support informed decision making, enhance governance, and ensure that CITs are implemented in a way that aligns with plan objectives and participant needs.
Conduct thorough due diligence
- Review the Declaration of Trust, which governs the CIT’s operations, including investment powers, valuation methods, and participant rights.
- Examine the Participation Agreement to understand redemption terms, notice periods, and liquidity provisions. As an example, evaluate the fund's anti-dilution policy.
- Assess the investment manager’s track record, subadvisor relationships, and any performance dispersion across share classes.
- Request to see Global Investment Performance Standards–compliant performance data, if available.
Understand regulatory oversight
- CITs are regulated by the Office of the Comptroller of the Currency (OCC) under banking law, not securities law.
- Sponsors must ensure the CIT is maintained by a qualified bank or trust company and complies with Employee Retirement Income Security Act of 1974 Section 403(a).
- Unlike mutual funds, CITs do not file prospectuses or register with the SEC, so sponsors must rely on trust documents and audited financials.
- A sponsor should verify that the CIT is listed on the National Securities Clearing Corporation Fund/SERV platform for operational compatibility and confirm that the trustee is a national bank with fiduciary powers under OCC regulations.
Monitor performance and operations
- Establish a quarterly review process that includes performance attribution, peer benchmarking, and fee analysis.
- Use custom reporting tools or third-party fiduciary platforms to track CIT performance against benchmarks and Investment Policy Statement criteria.
- Monitor unit value fluctuations, especially in CITs with less frequent pricing (e.g., weekly or monthly).
Ensure transparency and reporting
- Request audited financial statements, unit value history, and investment commentary from the trustee.
- Ensure the CIT provides participant-level disclosures that meet Department of Labor 404a-5 requirements, including expense ratios and performance.
- Confirm that the CIT is included in the plan’s Form 5500 Schedule C, if applicable.
- For a CIT equity fund, sponsors should ensure the trustee provides quarterly fact sheets, top holdings, and sector exposures, and that these are accessible via the recordkeeper’s participant portal or by another reasonable method.
Evaluate liquidity and trading mechanics
- Understand the unitization process, especially if the CIT uses daily net asset values or forward pricing.
- Confirm cutoff times for trades, settlement cycles, and cash flow management policies.
- Assess whether the CIT supports in-kind transfers, which may be relevant during plan transitions or mergers.
Assess customization opportunities
- Larger plans may negotiate custom share classes with lower fees or tailored investment mandates.
- CITs may allow white labeling, where the fund is branded under the plan sponsor’s name for participant familiarity.
- Sponsors can request custom glide paths or environmental, social, and governance overlays in CIT target date funds.
Educate participants and stakeholders
- CITs are not listed on all public investment data platforms, so sponsors must provide custom fund fact sheets and plain-language summaries.
- Include CIT education in fiduciary committee training, participant webinars, and enrollment materials.
- Ensure recordkeepers display CITs with clear naming conventions and performance data.
By applying these best practices, sponsors can strengthen fiduciary oversight, improve participant outcomes, and ensure that CITs are integrated effectively within their retirement plan strategies.
