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CAPABILITIES

Collective investment trusts

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Why consider collective investment trusts?

Collective investment trusts (CITs), also called collective trust funds, represent an alternative investment vehicle to mutual funds for qualified retirement plans. Both are investment vehicles comprised of pooled assets invested in securities according to a predetermined strategy to meet a specified objective.

Featured products

Fund Share class CUSIP Total Download
Invesco Stable Value Trust I 46X197XX3 0.38% Fact sheet
Invesco Stable Value Trust A11 46X190XX8 0.33% Fact sheet
Invesco Stable Value Trust B11 46X193XX2 0.31% Fact sheet
Invesco Balanced-Risk Allocation Trust C 46X158XX5 0.01%2 Fact sheet
UBC Russell 3000 Index Trust C 46X306XX0 0.00%2 Fact sheet
Invesco Emerging Markets Equity Trust T 29216X502 0.05%2 Fact sheet
  • 1

    Share class is restricted to certain clients; contact your Invesco client service representative for eligibility.

  • 2

    Expense ratio is shown with standard management fee; share class is gross of fees and may vary by client.

Frequently asked questions

  • A collective investment trust (CIT), also known as a collective trust fund, is a pooled investment vehicle available only to qualified retirement plans. 

    CITs are sponsored and maintained by a bank trust department or a trust company. 

    CITs generally cost less than registered funds due to their marketing limits, fewer regulatory filing requirements, and lack of external board members. Cash flows are also more stable in CITs because they are exclusively available to qualified retirement plans. CITs trade like mutual funds (daily and electronically via the National Securities Clearing Corporation) and offer similar transparency to registered funds.

    CITs are maintained or sponsored by a bank or trust company and regulated by the US Office of the Comptroller of the Currency (OCC) or a state banking regulator. The Texas Department of Banking regulates Invesco’s CITs. The DOL also oversees the funds through its oversight of ERISA plans. 

    CITs are only available to investors in qualified retirement plans. Qualified retirement plans include employee benefit plans as defined under section 401(a) of the Internal Revenue Code, specific governmental plans, and insurance separate accounts consisting solely of assets in qualified retirement plans. This category includes the following defined contribution and defined benefit plans:

    Defined contribution

    • 401(k) plans 
    • Profit sharing plans 
    • Stock bonus plans 
    • Thrift plans 
    • Money purchase plans 
    • Target benefit plans 
    • Taft-Hartley plans

     

    Defined benefit 

    • Pension plans 
    • 457 plans 
    • Cash balance plans 
    • Master trusts 
    • Insurance separate accounts 
    • Taft-Hartley plans 

     

    Examples of ineligible investors include health and welfare plans, IRAs, and 403(b) plans.  

    CITs are best suited for qualified retirement plans that don’t require the revenue sharing or sub-transfer agency fees associated with a mutual fund but don’t have the assets to support a large institutional separate account. They are also suitable for retirement plans that may have the size to support an institutional separate account but wish to avoid assuming the burden that comes with ownership of securities in a fund, such as foreign sub-custody fees and International Swaps and Derivatives Association filings.

    Because collective investment trusts don’t have the same restrictions as mutual funds have on investing in alternatives or derivatives, they are well-suited to plans seeking exposure to pure alternative investment markets, such as commodities, real estate, bank loans, or absolute return strategies.

    Most CIT providers have a website where key fund information is available. Invesco’s CIT website offers daily and historical prices, performance details, fact sheets, and more. Additionally, Invesco feeds information on its CITs to large third-party aggregators, such as Morningstar and Fi360.

    Participation agreements are standard across the CIT industry. They are required because, unlike mutual funds, the CIT provider relies on representations made by the investing plans for the exemptions necessary to offer a CIT.

  • Unlike mutual funds, CITs are exempt from the SEC investment company registration requirements. Therefore, CITs aren’t subject to the same fund registration fees and expenses as mutual funds, such as the requirement to produce a prospectus. They don’t charge 12b-1 fees or any fees in connection to the purchase or sale of units of funds. 

    To qualify for this exemption, CITs are only available as investment vehicles within a qualified retirement plan, such as a 401(k) plan or pension plan. Since they aren’t available to the general public, they aren’t advertised. 

    Because CIT investors are all institutional retirement plans, CITs generally keep much lower cash balances than retail mutual funds since retirement plan participants usually leave their money where it is longer and tolerate market fluctuations better than retail investors. At the same time, retirement plan cash flows tend to be rather predictable, mainly consisting of regularly scheduled contributions, withdrawals, and rebalance activity.

    This predictability allows CIT portfolio managers to reduce cash flow volatility because they don’t have to raise cash to meet redemptions as often and can typically predict their cash flow needs in advance. Since cash balances are generally very low, more of an investor's contributions remain fully invested in the market rather than diluting performance by remaining as uninvested cash in a CIT. 

    There is no prospectus or statement of additional information for Invesco’s CITs. Instead, the offering document for them is the declaration of trust, which contains a description of each fund and the provisions governing its operation. Each investing plan executes a standard participation agreement prior to investing, in which the plan represents that it’s eligible to invest in the CIT. The participation agreement also contains the fee schedule for the plan's fund investments.

    The key difference between CITs and mutual funds is that CITs are exempt from the investment company registration requirements of the Investment Company Act of 1940 and the securities registration requirements of the Securities Act of 1933. These exemptions are available because CITs are not available to the general public. They can only be offered by a bank to certain qualified employee retirement plans.

    The reasoning is that qualified plans don't require the protection of registration because individual investors/plan participants are already protected through other fiduciaries. In addition to the trustee for the CITs, who acts as fiduciary for all fund investors, individual plan participants investing in the funds are also protected by an independent plan fiduciary, usually the plan sponsor. 

    Since CITs are not registered investment companies (mutual funds), they don’t produce a prospectus. Instead, a CIT's governing document is its declaration of trust. Each plan sponsor receives a copy of the declaration of trust upon their initial investment into an Invesco CIT. 

    Fund operating expenses, such as audit, custody, fund accounting, and transfer agency fees, are accrued and deducted daily from the total fund assets prior to striking the daily net asset value (NAV) for the fund and prior to calculating performance. Fund operating expenses are expressed as a ratio of total assets. The most recent audited expense ratios for Invesco’s CITs can be found in the annual reports. Quarterly unaudited expense ratios can be found on the fund fact sheets. The expenses on the funds are generally lower than those for mutual funds and decrease as fund assets grow.

    One of the more well-known features of CITs is their ability to charge negotiable fees to their clients. Invesco’s CITs offer this type of pricing flexibility for most funds in Class A/C/T shares of a given fund. Additionally, Invesco’s CITs offer defined contribution-friendly, net of management fee pricing, with no revenue sharing or sub-transfer agent fees.

    CITs are exempt from taxation under IRS Revenue Ruling 2011-1 since they can only be purchased by specific qualified retirement plans such as 401(k) and defined benefit plans.

    Because CITs are only available as retirement plan investments, they don’t pay out dividends or capital gains. All income and earnings from the sale of securities are reinvested back into the fund with a resulting increase/decrease in share price. In other words, any profit or loss to the fund is reflected in the daily share price. The exception to this is stable value funds. To maintain a daily share price of $1 per share, all dividends for these funds accrue daily and are reinvested back into investor accounts on the last business day of each month as dividends.

    Invesco’s CIT Class A/C/T share class investments represent our flexible pricing product offerings, where each investing plan can have its own custom fee schedule. For this reason, net asset values (NAVs) and performance for Class A/C/T shares of any Invesco CIT are calculated differently from those of mutual funds.

    Since management fees vary for each plan, they must be charged outside the daily NAV. Therefore, the NAV of a Class A/C/T CIT does not reflect the deduction of investment management fees, although it does include fund expenses.

    Returns for Class A/C/T shares are calculated using gross of fees or standard net of fees. Gross-of-fee fund performance is calculated before the deduction of management fees but after the deduction of fund operating expenses. Standard net-of-fee fund performance is calculated after the deduction of fund operating expenses and the standard investment management fee applicable to the fund. Individual plan performance will vary depending on the timing of contributions and withdrawals and the plan’s fee schedule. The monthly adjusted returns are compounded and then annualized to compute the long-term returns.

    Net-of-fee returns, as provided by Invesco Trust Company for a fund’s Class A/C/T shares, are net of Invesco's standard management fee, which may not be the actual fee paid by the plan. The actual management fee varies for each plan based on the fee negotiated with the plan. This negotiated fee can fluctuate daily based on the various asset level breakpoints reached once the daily fee accrual is calculated for each plan.

    However, any share class other than Class A/C/T within Invesco CITs has a fixed management fee. Therefore, the daily NAVs and net performance reflect the deduction of management fees for that class of shares for all investors.

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