Collective Investment Trusts

[javacontour]

Vangard 401(k) options moving from the standard mutual funds to collective investment trusts as the new option starting in November. School me on the plusses and minuses. I think I have some of them. Plus: lower management fees Minus: the trustee doesn't have the same SEC oversight relative to a bank or other holding your shares of the underlying mutual fund. Anything I'm missing?

 

[Virtus_Probi]

I will ping the wife, she works for a financial planner.

 

[Vuflanovsky]

I think you have the basic takeaway as I understand them. CITs aren't new but have been been on deck for the last decade or so and are slowly gaining popularity. One of the knocks on CITs is that being unregulated, they also are unlike regular mutual fund investing in that record keeping and performance reporting aren't the same. I can assume that would differ between plans. Ten years ago, they were cheaper in relation to regular mutual fund plans. Supposedly that's down to around 5 basis points today because over the last decade, the mutual fund industry introduced changes in share classes and cost and fee cutting measures that took up a lot of the cost differences on average.

 

[javacontour]

Not that the Fees are all that high to begin with, so I'm not sure I'm saving all that much.

 

[Mr Nice]

Nice low expense ratios.

 

[javacontour]

Originally Posted By: Mr Nice

Nice low expense ratios.

Index funds, not much to manage, so no need for high fees.

 

[Mr Nice]

I've posted before my 401K fees and they are also very similar to what you posted. Luckily your company has a good 401K plan, some plans are highway robbery and charge crazy high fees.

 

[Virtus_Probi]

Sorry, my wife only had limited knowledge concerning CITs as she hasn't had to deal with them at her work...seems like you got some more useful info from other posters here.

 

[Nate1979]

Here is the Boglehead wiki on the subject. https://www.bogleheads.org/wiki/Collective_Investment_Trusts There are really no downsides. The oversight and applicable laws are just different. Some different reporting requirements and such but as they are mostly used in 401k's this really is a nonissue.

 

[javacontour]

Thanks, I didn't really think it was a scam. Just wanted to understand what, if any differences it may have made to me.

 

[Bladecutter]

Originally Posted By: javacontour

Not that the Fees are all that high to begin with, so I'm not sure I'm saving all that much.

Yes, I received the same notice yesterday for my company's 401k. I have shares of both OMMW and OURM (not so upset about this one, honestly), and OMMW is my main fund. Trying to decide if I should let the change happen, or switch over to a different fund, like DODGX, which has much higher costs, but good returns. BC.