Trillions in 401(k) savings flowing into murky trusts

Millions of Americans check their 401(k) balances each quarter without recognizing the name of the product holding their retirement savings.

The familiar mutual fund, once the standard choice for workplace retirement plans, is gradually being overtaken by an alternative that most participants are still unfamiliar with.

Collective investment trusts, known as CITs, now account for 42% of all assets in defined-contribution plans, up from 23% a decade ago, according to Morningstar's 2026 Retirement Plan Landscape Report.

CITs first surpassed mutual funds in target-date assets in 2024, capturing 52% by year-end and rising to 54% by year-end 2025, according to Morningstar's 2026 Target-Date Fund Landscape.

The appeal for employers is clear: CITs hold the same kinds of stocks and bonds as mutual funds but charge significantly lower fees.

Collective investment trusts have quietly overtaken mutual funds in 401(k) plans

The scale of the migration into CITs is staggering when measured across the full retirement industry and every tier of plan size. For 401(k) plans with more than $1 billion in assets, nearly half of all holdings sat in collective investment trusts by 2024, Bloomberg reported.

Plans in the $100 million to $1 billion range allocated about 30% to these vehicles, and that figure continues to rise. Asset managers converted $54.3 billion in target-date mutual fund assets into CITs in 2025 alone, the highest total on record outside of 2022, according to a Morningstar report.

"It's one of the easiest decisions a plan sponsor can make. Costs are low, and professionals are making decisions," said Janet Yang Rohr, CFA, Director of Multi-Asset and Alternative Strategies, Morningstar.

The cost advantage fueling this shift is substantial enough to reshape retirement outcomes over the course of a full career of saving and compounding. The Department of Labor has long warned that a 1% difference in annual fees can reduce a retirement account balance by 28% over 35 years of consistent saving.

Why can no one measure the true size of the CIT market?

The fundamental challenge with collective investment trusts is that the regulatory framework governing them was never designed for a multi-trillion-dollar industry serving millions of retirement savers.

CITs originated in the early 20th century when regulators first allowed banks to manage customer assets in trust, and they were explicitly exempted from the SEC regime created after the Great Depression.

Estimates of the total CIT market vary wildly depending on who is counting and what methodology they use to gather data. The Financial Stability Oversight Council at the Treasury has acknowledged the limited data available on the industry's overall size.

The SEC estimated the market at roughly $7 trillion in 2023, while consultancy Cerulli Associates placed it closer to $6 trillion based on a survey of asset managers conducted the following year. BlackRock's federal filing states the firm manages about $1.37 trillion in CIT vehicles for retirement accounts, Bloomberg reported.

Unlike mutual funds, CITs are not required to publish daily valuations, prospectuses, proxy voting records, or standardized performance data to the public.

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Private equity could reshape your 401(k) through collective investment trusts

The regulatory gap surrounding CITs is about to take on heightened significance as these vehicles become the primary channel for routing private market investments into retirement plans.

President Trump signed an executive order on August 7, 2025, directing federal agencies to ease access to private equity, real estate, cryptocurrency, and other alternative assets within 401(k) accounts.

The Department of Labor issued a proposed rule on March 30, 2026, that would establish a process-based safe harbor for plan fiduciaries selecting designated investment alternatives, including, but not limited to, CITs with alternative-asset exposure.

Because CITs do not face the same restrictions on illiquid investments that mutual funds do under SEC rules, they have become the vehicle of choice for early launches by major asset managers entering the private markets space.

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BlackRock and Goldman Sachs Asset Management have both contributed CIT products that incorporate private-market components. BlackRock provides the custom glidepath and private equity exposure for Great Gray's Panorix Target Date Series, launched in June 2025, while Goldman Sachs Asset Management launched the Goldman Sachs Collective Trust – Private Credit Fund in July 2025. Alternative asset managers are actively developing similar offerings.

Private assets accounted for less than 0.5% of the approximately $8.7 trillion in 401(k) plans, according to recent Department of Labor and Investment Company Institute data.

In defined-benefit pension plans, by contrast, alternative investments, including private equity, real estate, hedge funds, and private credit, accounted for roughly 18% of holdings in 2023, according to WTW's analysis of Fortune 1000 pension plans. Closing even a portion of that gap inside the $10 trillion 401(k) market would channel hundreds of billions of dollars into private equity, private credit, and other illiquid vehicles.

Chris Bailey, a director in Cerulli Associates' retirement practice, told Bloomberg that private markets will enter defined-contribution plans primarily through CITs unless regulators significantly alter the liquidity requirements currently applied to mutual funds.

CIT defenders say retirement savers remain well protected under existing rules

Industry representatives push back firmly against the characterization that collective investment trusts operate in a regulatory vacuum or without meaningful investor protections. CITs are selected by plan sponsors who must comply with the Employee Retirement Income Security Act, and the Department of Labor maintains direct oversight of those fiduciary obligations.

In a recent Bloomberg feature on the CIT industry, three industry and government voices defended the existing regulatory regime.

Stephen Bradford, managing director of strategic communications at the Investment Company Institute, said CIT trustees and asset managers operate under ERISA's high fiduciary standards and that investors should feel confident in the protections those standards provide.

Jason Levy, senior counsel for trust and administrative services at Great Gray Trust Company, which manages about $269.8 billion in CIT assets as of September 30, 2025, said the regulatory burden on CITs is not lighter but instead tailored to the different markets these products serve.

Daniel Aronowitz, assistant secretary of labor for the Employee Benefits Security Administration, said the agency actively monitors the CIT marketplace as part of its broader mission to safeguard the retirement savings of American workers, retirees, and their families.

Congress weighs opening CITs to nonprofit and education workers' retirement savings

The rapid rise of collective investment trusts reflects a quiet but consequential shift in how retirement savings are managed. Lower costs have driven widespread adoption, yet researchers and regulators have warned that limited transparency and fragmented oversight leave important gaps in understanding where trillions of dollars ultimately reside.

As these vehicles expand into private markets and potentially into 403(b) plans covering some 15 million teachers, nonprofit, and hospital workers under legislation the House passed in December 2025, industry analysts say their role will only grow more complex. The debate is no longer about whether CITs will dominate, but how their structure fits within a system built on visibility and accountability, according to Cerulli Associates.

Related: What to Know about Including Annuities in Your 401k

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This story was originally published May 9, 2026 at 3:17 PM.