“For the past 20 years, I have been serving the financial needs of high net worth clients and small to mid size companies in Mankato and throughout the country. As the result of my passion for investing, I developed my investment system that seeks to maximize risk-adjusted returns for my clients. I have now taken that system one step further and made it available for 401(k) plans and their participants by creating three collective investment trust funds based on my Triple Discipline approach to investing.” Joe Michaletz
Unlike many other pension consultants, our firm can offer your 401(k) plan the following advantages:
- Our unique approach to managing risk while maximizing returns.
- As an investment advisor, we assume fiduciary responsibility in the selection of investments and educating participants, relieving you of that burden.
- We provide your plan with four cost effective asset allocated solutions designed to match the investment objectives and risk tolerance of your participants.
Our Asset Allocation Portfolios:
DAI Asset Allocation Growth Portfolio– designed to seek superior risk-adjusted capital appreciation by investing in a diversified portfolio of domestic and internal equities. (100% equities)
DAI Asset Allocation Moderate Growth Portfolio– seeks superior risk-adjusted capital appreciation with current income as a secondary objective. The fund will be invested in a diversified portfolio of domestic and international equities as well as fixed income securities. (80% equities, 20% fixed income)
DAI Asset Allocation Moderate Portfolio– designed to seek superior risk-adjusted capital appreciation and provide current income in a diversified portfolio of domestic and international equities and fixed income securities. (60% equities, 40% fixed income)
What are Collective Investment Trust Funds?
Today’s Collective Investment Trusts (CITs) combine the conveniences of a mutual fund with the cost advantages of an institutional sized separately managed account.
Overview
CITs are tax-exempt, pooled investment vehicles maintained by a bank or trust company for exclusive use in qualified pension or profit sharing plans, and certain government plans. CITs are subject to oversight by federal and/or state banking authorities, and the Department of Labor under ERISA. In addition, each CIT must be audited annually, and the resulting financial report must be available to current and potential investors. Unlike mutual funds, which are subject to the Investment Company Act of 1940, CITs are exempt from SEC registration. As a result, they generally have lower costs than do mutual funds.
Lower Fees
Keeping the fees down also leads to improved investor returns, an important consideration for plan sponsors who have a fiduciary duty to act in the best interests of plan participants and beneficiaries. Plan sponsors can enjoy additional cost savings based on total assets they have invested by aggregating balances in both defined benefit and defined contribution plans. This allows cost savings to be spread proportionately between the plan accounts in accordance with ERISA.
History
CITs have been around since the 1920s, but experienced a growth in popularity in the 1950s when the IRS declared them tax-exempt. As mutual funds gained popularity in the 1980s, offering bundled packages including record-keeping, trust and investment services, as well as daily pricing, the use of CITs decreased as more were converted to mutual funds. Currently, nearly half of all 401(k) assets are in mutual funds, while CITs represent approximately 20%.
Fiduciary Responsibility
Legislative changes, heightened awareness, and the Pension Protection Act have all led to plan sponsors being increasingly concerned with their liability to the plan and its participants for violations of Fiduciary duties. These duties include exercising care and diligence in evaluating plan costs, the appropriateness of the choice of investment options, and providing education and advice to participants on selecting their investment options. Sponsors have now found that moving to an unbundled solution can be more cost-effective and beneficial to participants. In this environment, the sponsor selects trust, administration and investment services separately, making costs more transparent and exposing revenue sharing arrangements. This also allows plan sponsors to choose among the best investment options for each slot in their plan.
401(k) Solution
CITs provide a cost-effective and versatile alternative to mutual funds for defined contribution plan investments. With increased emphasis on the fiduciary responsibility of plan sponsors to provide appropriate and cost-effective solutions, CITs meet those needs by offering the convenient servicing features of mutual funds, with lower fees and pricing flexibility.
At Discipline Advisors, Inc. (DAI), we recognize the benefits of CITs for 401(k) plans and their participants. As sub-advisor for the three DAI Asset Allocation Portfolios, we are providing plan sponsors and their participants with a cost effective, risk-based solution for their plans.
