Collective Investment Trust Takes TDF Approach

Investment services provider American Century Investments launched a collective investment trust (CIT) designed for defined contribution (DC) participants that incorporates the firm’s One Choice Target Date Portfolios.

“Collective investment trusts are critical to the defined contribution business because they give plan sponsors and their consultants more flexibility in building investment lineups for their employees,” says Rick Luchinsky, senior vice president of defined contribution investment-only (DCIO) business at American Century Investments.

Like mutual funds, CITs pool the assets of many investors and can take advantage of economies of scale. But unlike mutual funds, a CIT is typically operated on behalf of a single qualified retirement plan and is not available on the retail market. Another key difference is that collective trusts are issued by banks and trusts rather than by fund companies, meaning they are not regulated by the Securities and Exchange Commission (SEC). Because CITs are bank products, they are regulated by the comptroller of the currency and state banking commissioners. This offers sponsors another layer of protection, in that the bank or trust managers serve as plan fiduciaries under the Employee Retirement Income Security Act (ERISA), and their activities are subject to scrutiny by banking regulators (see “Investment Structure: Coloring the Investment Menu”).

American Century Investments says that Kansas City-based Lockton Companies will be the first client to use the CIT. The firm says Lockton, a global risk management and employee benefits consulting firm with about 5,000 associates, will add the CIT as its plan’s qualified default investment alternative (QDIA).

American Century, which began offering CITs in 2009, launched the new target-date CIT in order to meet client demand, Luchinsky says, adding that the One Choice Portfolios are the most popular investment product among his firm’s DC plan clients.

“Clients asked us to create a CIT using our target-date strategy,” he says. “This is the result.”

“Lockton is pleased to be the first client to use the new CIT,” says Thomas Clark, president of Lockton Investment Advisors and leader of Lockton’s retirement services practice. “After a lengthy due diligence process, we concluded that the investment philosophy and process of American Century’s One Choice Portfolios, combined with the pricing advantages of the CIT, were an excellent fit for our retirement plan.”

More information about the CIT is available by calling American Century Investments at 800-345-6488 or by visiting