COLLECTIVE INVESTMENT TRUSTS AND INDEXES – A GROWTH STORY
Deeper knowledge about how indexes work can drive better retirement plan outcomes
ALL OF YOUR CLIENTS
WANT POSITIVE OUTCOMES
But each client has unique challenges — from a Defined Benefit (DB) plan with a low funding status, to a Defined Contribution (DC) plan with mostly older participants — that need to be addressed. How can you improve outcomes for a wide segment of clients and gain a competitive advantage?
A better understanding of indexes and passive strategies can help.
Indexes are driving the growth of Collective Investment Trusts (CITs), and all indexes are not created equally.
PASSIVE IS GOING MASSIVE
When constructing DB plan portfolios, or DC plan investment menus, retirement plan sponsors rely on passive strategies both for their ability to accurately capture targeted exposures and for their cost-efficiency. However, there are many different passive strategies to choose from, where it is important to have an understanding of how the underlying index is constructed.
% OF DEFINED CONTRIBUTION PLANS UTILIZING CITS*
*Source: Callan Associates: 2019 Defined Contribution Trends Survey.
**Source: Vanguard “How America Saves” Trends Survey (passive core is defined as a comprehensive set of low-cost index options that span the global capital markets).
UNDERSTANDING HOW INDEXES WORK REVEALS THE CAPABILITIES OF CITs
Helping your clients achieve their goals requires time and research. That hard work is easier when you can apply an understanding of how indexes work—allowing you to make smarter portfolio choices. When you know a CIT is based on a FTSE Russell index, that tells you a lot about how accurately that index underlying the CIT represents the selected market, as well as the investment features of the index.