Trust Updates Archive

20070508--TRN, BofA Forget Mutual Funds, CIFs Are Hot!

September 21, 2007--Chicago, IL)--Scorned by banks in the 1990s, collective investment funds have emerged as the new darling of the investment community.

Two decades ago, trust bankers began converting CIFs to proprietary mutual funds, contending that CIFs were an outdated investment vehicle. The conversions spawned numerous class-action lawsuits. Today, CIFs are being ballyhooed as the new wunderkind by the investment community, which prefers to refer them as collective investment trusts, CITs. Many of the CIFs’ traits that bankers found outdated give CIFs exclusivity and a marketing edge, investment managers say.

While fiduciary insiders maintain that large pension plans have been demanding to be taken out of proprietary mutual funds and put back into CIFs, there was limited public substantiation. Wachovia’s “reverse conversion” of its 401(k) plans in 2002 was one of the few documented cases.

Shedding additional light was a study released this July by AST Capital Trust and the human resources consulting firm Hewitt Associates. AST provides directed trustee and back-office support services to financial advisors. The study supports the prevailing belief that CIFs are finding increased interest among pension plans, especially defined contribution plans. (A copy of the study can be downloaded by going to

Pension consultants and investment managers believe CIFs’ share of the market could double over the next five years.

For more on this topic, see the current issue of Trust Regulatory News.

No statement in this issue is offered as or should be
construed as legal opinion or advice

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