SEI White Paper: CITs Present Huge Opportunity For Investment Managers In Projected $7 Trillion DC Market
Operational, Product, and Distribution Expertise Key to Gaining Assets
OAKS, Pa., April 17, 2012 – Collective Investment Trusts (CITs) present tremendous opportunities for investment managers looking to gain market share in the multi-billion dollar defined contribution (DC) market. Yet, according to a white paper released today by SEI (NASDAQ: SEIC), a comprehensive understanding of CITs’ distinct operational, product, and distribution needs is essential to achieving asset growth. The report, entitled “Getting Ahead of the CIT Boom: Aligning Capabilities to Capture DC Market Share,” indicates a need for managers who provide services to collective investment trusts to address the unique operational requirements presented by CITs, work to set consistent and competitive pricing structures, and to generally have a strong understanding of the DC sales and distribution dynamics to gain market share. More comprehensive and standardized reporting, as well as increased internal and external education about CITs were also indicated as key steps necessary for success.
CITs’ share of the DC market has doubled in the past five years from 10 percent to 20 percent, according to the paper, and trends are clearly pointing to CITs gaining a greater share of the growing DC market. Even without an increase in market share above their current 20 percent, CITs in DC plans are projected to reach $1.4 trillion by 2020. While that number is significant, the paper suggests that there remains an ongoing need for education related to the benefits of CITs. Specifically, fee pressures are forcing investors to look for cost-effective options, which creates opportunities for those who offer CITs as a product solution given the general efficiency and often lower-cost structure of CITs over mutual funds. At the same time, there are challenges that need to be addressed to drive more widespread CIT adoption. In addition to a publicly available price, more comprehensive and standardized reporting, and more extensive and structured CIT offerings on DC recordkeeping platforms would broaden the appeal and availability of CITs.
“CITs have gained strong traction in the DC space in recent years and they present opportunities for managers as the market continues to expand,” said Ross Ellis, Vice President, Knowledge Partnership for SEI’s Investment Manager Services division. “But for managers to take advantage of the opportunity and gain assets, they must develop expertise in the complex operational, product, and distribution aspects of CITs. We expect that there will be a lot of assets in play but the managers who do the best job of educating their investors, and themselves, are the ones who will win.”
Although CITs are currently viewed as an institutional product with assets and flows predominantly in mega DC plans, the paper reports that CITs have been incrementally moving down market, significantly expanding the market opportunity. The universe of available CITs is also expanding, while the ongoing move to automatic enrollment and target date funds could additionally drive growth in the CIT market. According to the paper, while operational expertise will be critical for managers who support CITs, sales force alignment will also be a key consideration to help drive asset growth. Specifically, there is a need for sales forces to be aligned with targeted DC market segments to ensure focus and ease of adoption. The paper points to education among managers, investors, and influencers as the primary drivers of growth and ultimately ongoing adoption of CITs in the DC market.
The white paper is published by the SEI Knowledge Partnership, which provides ongoing business intelligence and guidance to SEI’s investment manager clients. To request the full paper please visit, http://www.seic.com/2012CITResearch.
About SEI's Investment Manager Services Division
SEI's Investment Manager Services division provides comprehensive operational outsourcing solutions to support investment managers globally across a range of registered and unregistered fund structures, diverse investment strategies and jurisdictions. With expertise covering traditional and alternative investment vehicles, the division applies customized operating services, industry-leading technologies, and practical business and regulatory insights to each client’s business objectives. SEI's resources enable clients to meet the demands of the marketplace and sharpen business strategies by focusing on their core competencies. The division has been recently recognized by the Money Management Institute as “Service Provider of the Year,” by Buy-Side Technology as “Best Fund Administrator” and by HFMWeek as “Best Single Manager Hedge Fund Administrator (Over $30B AUA)” in the U.S. and “Best Administrator – Technology Provider” in Europe. To learn more about SEI’s services, visit http://www.seic.com/IMS.
SEI (NASDAQ:SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of December 31, 2011, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $404 billion in mutual fund and pooled or separately managed assets, including $172 billion in assets under management and $232 billion in client assets under administration. For more information, visit www.seic.com.