Collective trust fund

Collective trust funds or Collective Investment Trusts (CITs) are a

Collective trusts are often used in connection with defined benefit plans and, when they can be valued daily, with defined contribution plans as well. Collective trusts generally are excluded from the definition of an “investment company” under Section 3(c)(11) of the Investment Company Act of 1940, and interests in these funds are generally exempt from registration under Section 3(a)(2) of the Securities Act of 1933.^[6] In addition, transactions involving interests in collective trusts generally do not require an entity to register as a broker-dealer under Section 15(a) of the Securities Exchange Act of 1934.^[7] However, when collective trusts are composed of IRA assets or so-called “Keogh plans,” or marketed to the public, some or all of these securities law exclusions and exemptions may not be available; in these situations, registration under one or more federal securities laws could be required.

Although they have been available for decades, early versions of collective trusts provided investors with little access to underlying holdings data and were valued infrequently, typically only once per quarter. As a result, collective trusts were quickly overshadowed by mutual funds, which provide investor friendly features such as daily valuations and greater transparency. However, given the later focus on retirement plan fees and full disclosure, and in light of technological advances, collective trusts have gained market share in the defined benefit and defined contribution markets.

Collective trusts pursue a wide variety of