The shift was quiet. It was also historic. As of year-end 2025, Collective Investment Trusts now hold 54% of all target-date fund assets in U.S. defined contribution plans — up from 52% at year-end 2024, when CITs first surpassed mutual funds in the target-date segment. Asset managers converted $54.3 billion in target-date mutual fund assets into CITs in 2025 alone — the highest total on record outside of 2022. The total CIT marketplace now exceeds $5 trillion, representing nearly 30% of all defined contribution plan assets, and regulators are only beginning to grapple with what that means for the 70 million Americans saving for retirement inside these plans.
What CITs Are — and Why They’re Different
Collective Investment Trusts are pooled investment vehicles administered by banks or trust companies. They function similarly to mutual funds — holding diversified baskets of stocks, bonds, or alternative assets — but they operate in an entirely different regulatory universe. CITs are exempt from SEC registration under the Investment Company Act of 1940. That means no required prospectus, no public daily NAV reporting, no proxy voting disclosures. Oversight falls to the Office of the Comptroller of the Currency (OCC) or state banking regulators, not the SEC.
The practical consequence: a worker auto-enrolled into a target-date CIT gets substantially less standardized disclosure than someone who bought the same strategy structured as a mutual fund. The lower fees are real — Vanguard data shows average CIT expense ratios of 0.07% versus 0.16% for comparable mutual funds — but so is the transparency gap.
The Oversight Gap Regulators Are Flagging
Boston College Law professor Natalya Shnitser has called the CIT regulatory framework “fragmented,” noting that limited public disclosure “makes it more difficult for plaintiffs to bring litigation challenging the inclusion of CITs on retirement-plan menus.” The SEC has raised concerns before the Financial Stability Oversight Council (FSOC), which has encouraged regulators to consider reforms. Cerulli Associates put it plainly: “The debate is no longer about whether CITs will dominate, but how their structure fits within a system built on visibility and accountability.”
The stakes showed up in federal court in March 2026. Participants filed suit in Ventura v. Lithia Motors, targeting a CIT target-date suite holding approximately $570.6 million — over 57% of plan assets. The complaint alleged that plan fiduciaries treated opaque, unregistered trusts as “set it and forget it” investments while “conflicted service providers extract[ed] excessive direct and indirect fees netted directly against participants’ retirement savings.”
New Rules, Legislation, and Expanding Access
On March 30, 2026, the Department of Labor issued a proposed rule establishing a process-based safe harbor for plan fiduciaries selecting investment alternatives — including CITs with private equity and private credit exposure. Ropes & Gray called it “the most significant development in ERISA fiduciary investment guidance since the DOL’s 1979 Investment Duties Regulation.” The public comment period closes June 1, 2026, with a final rule possible by year-end.
“Our goal is to deliver on President Trump’s promise for a new golden age by fostering a retirement system that allows more Americans to retire with dignity. This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today.” — U.S. Secretary of Labor Lori Chavez-DeRemer, March 30, 2026
Separately, the House passed H.R. 3383 on December 11, 2025 — a bill that would allow 403(b) plans to invest in CITs for the first time. The SECURE 2.0 Act of 2022 had cleared the tax-law barrier but left securities-law restrictions intact; H.R. 3383 addresses the remainder. More than 10 million teachers, hospital workers, and nonprofit employees with $1.5 trillion in 403(b) assets stand to gain access if the Senate acts.
What Near-Retirees Need to Know Now
If you’re between 55 and 73 and invested in a target-date fund, there’s a good chance you already own a CIT. They carry no ticker symbol — CITs don’t trade on open exchanges. Look for the word “Trust” or the abbreviation “Tr” in your fund’s name on your plan statement. Your plan administrator is required to provide a fact sheet or declaration of trust; request it if you haven’t seen one.
The fee advantage is real. The DOL has warned that a 1% fee difference compounded over 35 years reduces a retirement account balance by 28%. But as CITs increasingly incorporate private equity and private credit — BlackRock’s Panorix series launched in June 2025, Goldman Sachs added a private credit CIT in July 2025 — participants in default target-date funds may be gaining illiquid, harder-to-value assets without realizing it. CAPTRUST’s April 2026 advisory noted that “participant communication matters more than ever” as plan menus incorporate more of these vehicles.
One hard limit worth knowing: CITs cannot be held in IRAs or standard brokerage accounts — only inside employer-sponsored qualified plans. If you roll over a 401(k) to an IRA, any CIT positions will be liquidated and converted to cash or a substitute fund at that time.
What to Watch
The DOL comment deadline of June 1, 2026 is the next pivot point. The final rule — expected by late 2026 — will determine how much fiduciary cover plan sponsors receive when adding private-market CITs to default investment lineups. Senate action on the 403(b) CIT bill is the second major watch item for the second half of 2026.
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