NSCC Processes Rising Volume of CITs
NSCC’s Fund/SERV platform is processing a rapidly growing volume of collective investment trust (CIT) transactions on behalf of banks and trusts companies. Fund/SERV, the industry standard for mutual fund processing, has functionality that applies strategically to CITs, which are similar to mutual funds but available only through qualified retirement plans, such as 401(k)s.
“The efficiencies Fund/SERV has brought to the mutual fund industry for the past 20 years are now being extended to the collective fund segment of the retirement market,” said Ann Bergin, DTCC managing director and general manager, Wealth Management Services. “The Fund/SERV platform provides a robust, secure processing infrastructure to support the expansion of this investment vehicle at a time when more investors are focused on retirement planning options.”
Morningstar began rating CITs in 2007, an indicator of their growing popularity. And Financial Research Corp. stated last September that CITs are expected to account for about 20 percent of all defined contribution assets by 2011, up from 10 percent.
Drivers of growth
CITs are pooled investments offered and managed by a bank or trust company. While regulated by the Office of the Comptroller of the Currency, they are not bound by Securities and Exchange Commission (SEC) rules.
In 2007, the number of CIT transactions processed through Fund/SERV grew to 557,181, a 62% increase over 2006, when transactions totaled 343,196. “It took a couple of years for the CIT industry to recognize the benefits of processing through Fund/SERV, and then volumes started to climb,” said Chuck Patel, DTCC relationship manager, Wealth Management Services.
AST Capital Trust referred to the impact of Fund/SERV eligibility in a 2007 paper titled Collective Funds: Description, Oversight, Features & Trends. “This change was crucial to the increase in popularity of collective funds because Fund/SERV has become the processing standard for retirement plan providers,” the paper says. “Now, plan participants, sponsors and providers can complete collective fund transactions with the same ease as mutual funds.”
Services offered
Because they are held in qualified plans, CITs come into the Fund/SERV platform through its Defined Contribution Clearance & Settlement service, which leverages the transactional features of Fund/SERV with two other Mutual Fund Services:
- Networking, which facilitates the exchange and reconciliation of customer account-level information among all parties to a retirement investment transaction; and
- Daily Price & Rate File, which captures daily prices in the form of net asset values (NAVs) and rates for daily accrual funds.
[To learn more, contact Chuck Patel at cpatel@dtcc.com or 212.855.5660.]