401(k) Balances and the Rise of Collective Investment Trusts: A Look at Fees, Regulations, and Private Market Investments
401(k) balances are often invested in Collective Investment Trusts (CITs), which have become increasingly popular in retirement plans. CITs offer similar investments to mutual funds but with lower fees, making them an attractive option for employers. The shift towards CITs is evident across all plan sizes, with larger plans holding nearly half of their assets in CITs. Asset managers have been converting mutual fund assets into CITs, with a record $54.3 billion converted in 2025 alone.
The cost advantage of CITs can significantly impact retirement outcomes over time, as even a 1% difference in fees can reduce a retirement account balance by 28% over 35 years. However, the regulatory framework for CITs was not designed for the massive industry they have become, leading to challenges in oversight and data collection. Estimates of the total CIT market size vary, with the SEC estimating it at $7 trillion in 2023.
CITs are not required to publish daily valuations or standardized performance data, unlike mutual funds. This regulatory gap is becoming more significant as CITs are being used to route private market investments into retirement plans. President Trump's executive order in 2025 aimed to ease access to private equity and other alternative assets in 401(k) accounts, further highlighting the importance of regulatory oversight for CITs.
Asset managers like BlackRock and Goldman Sachs have introduced CIT products with private market components, signaling a trend towards incorporating alternative assets in retirement plans. While private assets currently make up a small percentage of 401(k) holdings, there is potential for significant growth in this area. Industry experts believe that private markets will enter defined-contribution plans primarily through CITs unless regulatory requirements change.
Despite concerns about regulatory oversight, industry representatives argue that CITs are selected by plan sponsors who must comply with fiduciary standards under ERISA. The Department of Labor oversees these obligations, providing investor protections within the existing regulatory framework.