Collective Investment Funds
Mutual fund similarity with more affordability
Collective Investment Funds (CIFs) are tax-exempt, pooled investment vehicles maintained by a bank or trust company that offer similar benefits to mutual funds at lower costs. They are available for investment only by ERISA retirement plans and certain other types of governmental retirement plans. CIFs are also referred to as collective investment trusts (CITs) or collective trust funds.
Evolving purpose of CIFs
CIFs were historically designed as investment vehicles for defined benefit plans. But they have evolved over the years. Today, CIFs have become a popular choice of defined contribution (DC) plan sponsors.
Because investment-related fees and expenses are generally the most significant costs for many retirement plans, plan sponsors recognize that cost-effective investment vehicles such as CIFs can mean sizable savings for their plans and their plan participants.
Plan sponsors have an ERISA-dictated fiduciary obligation to offer reasonably priced investment alternatives. Exploring the possibility of including CIFs on a plan's menu of investment options may help satisfy this requirement.
Making the choice
When considering different CIFs, consider choosing those that are advised by investment managers that also manage well-established mutual funds.
If plan sponsors need assistance with this type of due diligence, it may benefit them to work with a qualified financial advisor to help them make an informed decision.
Please contact your Legg Mason representative for more information about CIFs.
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The primary reason why CIFs have become popular: CIFs are generally less expensive than mutual funds.
All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s webpage for specific details regarding investment objective, risks associated with hedge funds, alternative investments and other risks, performance and other important information. Review this information carefully before you make any investment decision.