CITs Continue to Erode Mutual Fund Dominance in Defined Contribution Market

October 31, 2023 — Boston

This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes product trends as of September 2023, including mutual funds and exchange-traded funds (ETFs), and explores the rise of collective investment trusts (CITs).

Highlights from this research:

  • Mutual fund assets fell below $17 trillion as of the end of September, as assets dropped 4.4% on the back of $48 billion in net outflows. Outflows reached $292 billion YTD, while assets sit at February 2023 levels.
  • ETF flows in September were just slightly below the 2023 monthly average of $36 billion. Both active and passive ETFs gathered inflows in September, with active ETFs posting their strongest month of flows in 2023. The current pace has active ETFs on track to surpass their all-time annual flow record, set in 2022, at the end of October.
  • CIT asset growth has outpaced that of mutual funds since 2018, as DC plan sponsors and intermediaries value the cost advantages of the vehicle. Cerulli recommends that asset managers prioritizing distribution of investment strategies within the DC space continue to build their CIT offerings. RIA retirement plan aggregators (e.g., CAPTRUST, One Digital) are increasingly bringing CITs to small- and mid-market plans. While asset managers should not ignore the investment consultants and outsourced chief investment officers (OCIOs) that serve larger plans, they should pay attention to the product usage and buying process of these firms. The SECURE Act 2.0: Retirement Fairness for Charities and Educational Institutions Act (H.R. 3063) aims to amend the law to permit 403(b) plans to use CITs. This could open some of the $1.4 trillion segment of the retirement market, with larger plans and those working with an intermediary likely to be the first movers.

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Monthly Product Trends, October 2023 Issue.

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