What Is a Collective Investment Fund (CIF)?

A collective investment fund (CIF) is a trust made up of pooled assets from eligible clients. Typically, CIFs are held by trust companies or banks.

Let’s examine what CIFs are, how they work, and who can invest in them.

Definition of a Collective Investment Fund

A collective investment fund, or CIF, is a type of trust administered by a trust company or bank that combines assets from more than one eligible client. The collected assets must be:

• Retirement funds
• Pensions
• Stock bonuses
• Profit sharing
• Other types of tax-qualified retirement plans (exempt from federal income tax)

While they were originally designed for defined benefit plans, CIFs have become a common option for defined contribution plan sponsors. They are an institutional product typically only available to employer-sponsored retirement plans, pension plans, and select government retirement plans.

• Alternate names: Collective trust, commingled trust, collective investment trust, CIT

How Collective Investment Funds Work

A CIF is a type of fiduciary fund that contains assets pooled from multiple investors who are known as CIF participants. Banks are required to establish and operate CIFs in line with fiduciary activity guidelines from the federal Office of the Comptroller of the Currency, which are outlined in 12 CFR 9.18. All CIF plans must detail how the bank manages and administers the fund's assets, and must be approved by a bank's board of directors or an authorized board committee.

The CIF participants are the beneficial owners of the fund's assets, with each participant owning an undivided “participating interest” in the CIF’s aggregate assets, not any one specific asset. If a participant chooses to sell (or withdraw) their investment, they can only do so on the predetermined admission or withdrawal date and the amount of their distribution will be based on the valuation of the CIF’s assets. CIFs have eligibility requirements and both entering and exiting a CIF can be quite complicated. To join a CIF, participants must meet eligibility criteria set by the banking and securities laws.

Participants in a CIF should receive financial statements annually. These statements can include periodic accountings and an annual financial report for each fund.

Entities that pool securities, such as mutual funds, are typically required to be registered with the Securities and Exchange Commission (SEC). However, CIFs are exempt from SEC registration and reporting requirements if the bank or other authorized entity only allows participation by customers covered by the exemption.

CIFs vs. Mutual Funds

CIFs aren’t the only option when it comes to pooling assets to invest. Mutual funds are similar to CIFs but have fewer restrictions. To invest in a mutual fund, you only need to meet the fund’s minimum investment threshold. Unlike a CIF, mutual funds don’t typically have restrictions regarding the type of assets used to invest or eligibility requirements beyond a minimum investment.

However, mutual funds tend to cost more than CIFs. Because of their eligibility requirements, CIFs don’t serve retail clients and therefore don’t incur the costs of marketing to and supporting those clients, so they can generally charge lower fees than mutual funds.

What CIFs Mean for Individual Investors

Individual investors without access to employer-sponsored retirement plans probably don’t need to think about CIFs. But if your work-sponsored retirement plan participates in a CIF, it’s worth taking the time to understand your investment.

If you have questions, it’s always best to consult your plan sponsor about your retirement savings options.