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Institutional Vehicle Growth Lackluster


Cerulli's latest Retirement Edition is out, this time with insight into the development of institutional investment vehicles, particularly collective trust funds (CTFs).

Says the latest report, CTFs have evolved to become daily traded and more transparent, with the current focus on cost and income in retirement plans additionally providing the best opportunity to date for institutional products to become more prominent in defined contribution plans. But mutual fund managers continue to dominate the defined contribution landscape.

Cerulli analysts attribute this lack of momentum to several factors. For one thing, some institutional asset managers have reported that mandates from defined contribution plans into institutional vehicles are not meeting expectations. In addition, decision-making in defined contribution plans tend to be slow.

Also note that plan size is a key factor in the use of institutional vehicles such as CTFs or separate accounts. While overall, mutual funds will remain the primary investment vehicle, different plan sizes may be more inclined to use institutional vehicles.

According to Cerulli research, plans with more than $1 billion are the most likely to use institutional vehicles, both CTFs and separate accounts. But plans with less than $250 million in assets will continue to use mutual funds as the primary investment vehicle. Meanwhile, plans with between $250 million and $1 billion will also continue to prioritize mutual funds, but are more likely to use institutional vehicles — mostly CTFs — than plans with less than $250 million, especially those at the higher end of that range.


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