What Is a Collective Investment Fund (CIF)?

A collective investment fund (CIF), also known as a collective investment trust (CIT), is a group of pooled accounts held by a bank or trust company. The financial institution groups assets from individuals and organizations to develop a single larger, 澳洲幸运5官方开奖结果体彩网:diversified portfolio.

How a Collective Investment Fund (CIF) Works

CIFs aren't regulated by the 澳洲幸运5官方开奖结果体彩网:Securities and Exchange Commission (SཧEC) or the Investment Act of 1940 but operate instead under the regulatory authority of the Office of the Comptroller of the Currency (OCC). Although CIFs are pooled funds just as 澳洲幸运5官方开奖结果体彩网:mutual funds are, CIFs are unregistered investment vehicles, more akin to 澳洲幸运5官方开奖结果体彩网:hedge funds.

The primary objective of a collective investment fund is, through the use of 澳洲幸运5官方开奖结果体彩网:economies of scale, to lower costs with a combination of profit-sharing funds and pensions. The 澳洲幸运5官方开奖结果体彩网:pooled funds are grouped into a 澳洲幸运5官方开奖结果体彩网:master trust account—legally speaking, CIFs are set up as trusts—that is controlled by the bank or trust company, which acts as a trustee or executor. However, many financial institutions use investment companies or mutual fund companies as sub-advisors to manage the portfolios.

CIF Investments

The bank, acting as a 澳洲幸运5官方开奖结果体彩网:fiduciary, has a legal title to the assets in the fund. However, those participating in the fund own any benefits of the fund’s assets. They are, in effect, the beneficial owners of the assets. Participants don’t own any specific asset held in the CIF but have an interest in the fund’s aggregated assets. A CIF can invest in just about any kind of asset 🌳including stocks, bonds, commodities, derivatives, and even mutual funds.

A CIF is specifically designed to enhance its effective investment management by gathering the ꦰassets from various accounts into one fund that is directed with a chosen🦂 investment strategy and objective. By combining different fiduciary assets in a single account, the bank is typically able to decrease its operational and administrative expenses substantially. The designated investment strategy structure is designed to maximize investment performance.

According to the SEC, approximately $7 trillion was invested in CIFs as of 2023.

How CIFs Differ From Mutual Funds

Although both offer a variety of investment options and c💎onsis𝓡t of a basket of assets, CIFs differ from mutual funds in several meaningful ways.

Perhaps most notably, CIFs tend to have lower operating costs than mutual funds, since they don't have to meet SEC reporting requirements—providing prospectuses or installing independent boards of directors, for example.

CIFs are also offered only by banks and trust companies for retirement plans. They're not available to the general public, unlike mutual funds, which investors can purchase directly or through a financial intermediary, such as a broker.

The oversight of CIFs is usually delivered by managers employed by the trustee, whereas mutual funds are led either by a mutual fund manager or 💜group of managers as approved by a board of directors. 

CIFs cannot be rolled over into 澳洲幸运5官方开奖结果体彩网:individual retire꧒ment accounts (IRAs) or other accounts.

History

The first CIF was created in 1927. However, when the 澳洲幸运5官方开奖结果体彩网:stock market crashed two years later, the perceived contribution of these pooled funds to the ensuing financial hardships led to severe limitations on them. Ba🦩nks were restricted to only offering CIFs to trust clients and through employee benefit plans.

The situation began to change in the 21st century. CIFs started to be listed on electronic mutual fund trading platforms, which increased their visibility and frequency of trades. The Pension Protection Act of 2006 was a boost for CIFs, as it effectively made them the default option for 澳洲幸运5官方开奖结果体彩网:defined contribution plans. Finally, 澳洲幸运5官方开奖结果体彩网:target-date funds (TDFs) became popular, leading to a ꦯrise in🍸 CIFs.

The Bottom Line

Collective investment funds (CIFs) are generally available via employer-sponsored retirement plans, pension plans, and insurance companies. Other names for them include common tru🌊st funds, common funds, collective trusts, and commingled trusts.