Among domestic equity and fixed-income strategies, the top performers offered as collective investment trusts were mostly large-cap growth equity and short-duration bond strategies for the year ended Dec. 31, according to Morningstar Inc.'s database of CITs.
Seven of the top 10 domestic equity CITs were large-cap growth strategies, while two were small-cap growth strategies. One midcap growth strategy landed on the list for the year ended Dec. 31.
In the top 10 among domestic fixed-income CIT strategies, eight were short-term bond funds, while the remaining two strategies were intermediate-term and high-yield bond strategies.
Institutional investors have shown interest in CITs "because they are cheaper, they don't have the same reporting requirements (as other vehicles) and (managers) can customize the fees," said Tony Thomas, manager research analyst, equity strategies at Morningstar, Chicago.
CITs, for instance, are not regulated by the U.S. Securities and Exchange Commission, and have lower marketing and compliance-related costs as they are not required to disclose monthly performance and portfolios, like mutual funds, according to a Morningstar online FAQ on CITs. These investment vehicles are supervised by the Office of the Comptroller of the Currency, however.
Fee customization for institutional investor clients, in particular, "gives (managers) some advantages (as) you are seeing so much litigation about fees and retirement plans," in the marketplace, Mr. Thomas noted.
Morningstar's universe of CIT assets was an estimated $2.4 trillion as of June 30, according to Mr. Thomas.
Cerulli Associates Inc., Boston, found that nearly all CIT providers, or 92%, cited investor demand for low-cost vehicle options as "very important" considerations in the development and distribution of CITs, its survey conducted throughout the first half of last year found.
Twenty-six CIT providers representing nearly $2.3 trillion in CIT assets participated in the survey.
Of note, the majority of flows into CIT strategies have come from defined contribution plans, said James Tamposi, a research analyst in Cerulli's institutional practice.
More than 90% of flows to large firms, those having more than $50 billion in collective investment trust assets, were attributed to DC plans, Mr. Tamposi said.