Wilmington Trust and Nasdaq have partnered to offer tickers for over 200 collective investment trusts (CITs) on the Nasdaq Fund Network (NFN).
The two entities look to encourage CIT adoption among investors, a move that they say has stalled due to low awareness of the funds. Comparable to mutual funds, CITs are low-cost investment vehicles accessible via 401(k) plans, but have largely remained unacknowledged in the past due to little understanding in price and performance.
Rob Barnett, head of Retirement Distribution & product leader for Wilmington Trust’s CIT Business, expects the standardized tickers will incite clarity and usage of CITs, especially as investors, employers, and advisers will have access to greater information.
“Our hope is relative transparency,” he tells PLANSPONSOR. “We’re giving broader reach for CITs, so participants and plan sponsors can use it, and so advisers have easier access. This will allow participants to find price and performance by going into NFN’s search engine and typing up the ticker.”
According to a recent report by Cerulli Associates and the Coalition of Collective Investment Trusts, the lower cost associated to CITs is the primary driver of their growth. However, more than 40% of CIT providers identified a lack of knowledge among advisers as a top challenge to their adoption in DC plans, along with a noticed absence of transparency. The small amount of reporting done on CITs contributes to its little adoption, compared to the more common mutual fund. More than half of providers noted a lack of CIT information threatens the fund’s adoption, according to Cerruli.
“If advisers find it difficult to find information on a CIT, they’re going to have trouble recommending it,” says Barnett.
At Nasdaq, the NFN works as a global dissemination service, collecting and spreading data and information on over 35,000 mutual funds, market funds and other investment options to the public. Its aim is to provide detailed, daily analysis on investment funds and products. The Network was relaunched in March 2019 from its previous name, the Mutual Fund Quotation Services (MFQS), and Wilmington Trust will be the first institution to register CITs with the Network.
“It is more important than ever for our clients to understand the various investment vehicles and make informed choices,” says Christopher Randall, head of Retirement and Institutional Custody Services at Wilmington Trust. “As the first institution to register CITs with Nasdaq Fund Network, we are helping overcome a major challenge to widespread adoption of CITs, providing the information advisers, plan sponsors and participants need to make fully informed decisions.”
Barnett believes implementing these tickers will inspire other firms to follow, both in embracing CIT adoption and awareness.
“Our hope is that we’re not just the first, that there are others that adopt this process,” he says. “That we’re not just the only user, but that we can help create this widespread use of information across all CITs.”