Test your CIT knowledge
Do you know the key features of collective investment trusts? Take our quiz and find out.
I regularly talk with retirement plan sponsors who are considering collective investment trusts (CITs), along with mutual funds and other investment vehicles, as part of their investment menus. I find that their knowledge is growing about CITs (pooled investment funds designed exclusively for qualified retirement plans), but they still have many questions about how CITs work.
To help you gauge your knowledge about CITs (also known as collective trust funds, or CTFs), I developed this short quiz. There are no prizes — other than the CIT knowledge you need when developing your lineup of investment options for your plan participants. Answers are at the end.
Test your CIT knowledge
1. CITs are issued by banks or trust companies and regulated by:
a. The Office of the Comptroller of the Currency (OCC)
b. A state banking examiner
c. The Securities and Exchange Commission (SEC)
d. Either a or b
2. Participants of which types of plans are eligible to invest in CITs?
b. Defined benefit/pension plans
c. Certain 457 government plans
d. All of the above
3. CITs have reporting similar to that of mutual funds.
4. Which document governs a CIT?
a. A prospectus
b. A fact sheet
c. A Declaration of Trust (DOT)
5. Features of a CIT can include:
a. The ability to customize fees
b. Availability on recordkeeping platforms
c. Access to different asset classes
d. All of the above
6. Paperwork for a plan to invest in a CIT is onerous.
7. Stable value strategies are available in all investment vehicles.
8. In 2015, CITs held how much in retirement plan assets?
a. $2.5 trillion
b. $1.6 trillion
c. $0.5 trillion
1. D. CITs are exempt from registration with the SEC. However, they are governed by several federal and state laws and regulations. The primary regulator will either be the OCC or a state banking examiner, depending on the charter of the CIT provider. Additional regulators that have oversight of CITs include the Department of Labor, the Internal Revenue Service and the SEC.
2. D. Participants in qualified retirement plans can invest in CITs. Plans must be exempt from federal income tax under the IRS Code Section 501.
3. True. CITs are not required to prepare prospectuses, but they offer participant fact sheets, holdings information and performance data. They also provide 404(a)5, 408(b)2 and 5500 Schedule C information.
4. C. The DOT spells out the CIT’s terms and conditions, including investor eligibility, valuations, subscriptions and redemptions.
5. D. Many CITs offer flexibility in terms of fees and strategy selection, as well as accessibility through recordkeeping platforms.
6. False. While a Participation Agreement is required, it is typically fairly standard language across CIT providers.
7. False. A retirement plan may offer a stable value strategy through a CIT or a separate account; it is not available in a mutual fund vehicle.
8. A. In 2015, retirement plan investors held $2.5 trillion in CITs, up from about $1.6 trillion in 2010, according to Cerulli Associates. (The Cerulli Report: The State of U.S. Retail and Institutional Asset Management 2016)
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Senior Vice President
Betsy Warrick is Senior Vice President of Invesco Trust Company, responsible for servicing institutional clients, record-keepers, third-party administrators, broker-dealers and other intermediaries.
Ms. Warrick joined Invesco Trust Company in 2006. Prior to this she was employed by Invesco Retirement, Inc. for six years, most recently as director of strategic planning and director of service development. Prior to joining Invesco, she was employed by the Dun & Bradstreet Corporation (D&B) for 12 years. She held several positions with D&B including call center manager, director of information resources, district manager, project manager, regional trainer, divisional operations manager and business analyst.
Ms. Warrick earned her MBA from Georgia State University, Robinson College of Business and her BS degree from Minnesota State at Mankato with a double major in marketing and international business. She is a board member of Invesco’s Defined Contribution Institute.