CITs vs. mutual funds
CITs can be simpler and less costly to administer.
An attractive option for qualified plans
CITs are only available to qualified defined contribution, defined benefit, and pension plans, and they have fewer regulatory restrictions, lower operating expenses, and more flexible pricing compared with mutual funds. CITs can invest in a variety of asset classes and in other investment vehicles. More plan sponsors are offering CITs as a complement or investment alternative to mutual funds.
Differences between CITs and mutual funds
ERISA plans; some other plans
Available plan types
ERISA and non-qualified plans; other U.S. investors
Office of the Comptroller of the Currency (OCC) or state banking regulators. In addition, the Dept. of Labor administers ERISA, which applies to CITs
Securities and Exchange Commission (SEC)
Fees vary by share class, with greater overall flexibility than mutual funds; no 12b-1 fees
Fees vary by share class; 12b-1 fees permitted
The bank or trust company is the trustee and acts as ERISA fiduciary
Board of mutual fund directors/trustees provides independent oversight of investment management. The Investment Company Act of 1940 also requires a detailed compliance program
Declaration of Trust and Participation Agreement
Prospectus and Statement of Additional Information
Growing availability via Morningstar, fi360, and other evaluation systems
Widely available on news and financial information websites
Fewer required filings
More heavily regulated with greater SEC filing requirements
Frequently asked questions | The differences between CITs and mutual funds
Why do CITs have a cost advantage versus mutual funds?
Due to different registration requirements, CITs often represent the least expensive way for a qualified plan to access a particular investment strategy.
Is there usually a “one size fits all” approach for CIT pricing?
No. CITs offer flexible pricing that may or may not include revenue sharing. Some CITs may offer “relationship pricing” at a firm’s home-office level.
What type of transparency do CITs offer?
Recordkeepers price CITs at the same time of day as mutual funds. In addition, many trust companies have partnered with the Nasdaq Fund Network (NFN) to register their CITs under a searchable ticker symbol. NFN distributes performance data on over 650 CITs, reaching millions of investors daily via information platforms, online services, and personal finance apps.
How has performance and tracking evolved?
CITs are available via Morningstar, Fi360, BrightScope, and other reporting systems.Download our complete CITs FAQs (pdf)