Target-date CITs ended 2025 holding 54% of the $4.8 trillion sitting in target-date strategies, up from 52% a year earlier, according to Morningstar’s 2025 target-date report. Every one of the 21 new target-date series launched during the year arrived as a collective investment trust, not a mutual fund. The number that frames the decade is simple: the default investment for American retirement savers is quietly migrating out of the mutual fund and into a bank-trust wrapper most participants have never heard of, and the shift is accelerating rather than slowing.
For asset managers, plan sponsors, and the advisors who sit on retirement-plan committees, this is a structural change in where the country’s largest pool of long-term savings actually lives. The fund strategy is often identical. The wrapper around it is not, and the wrapper is doing things to fees, transparency, and portability that deserve a closer look.
Key Takeaways
- Target-date CITs held 54% of $4.8 trillion in target-date assets at the end of 2025, up from 52% in 2024, per Morningstar.
- All 21 new target-date series launched in 2025 were collective investment trusts, many cloned from existing mutual fund lineups at firms like T. Rowe Price.
- CITs average 23.9 basis points for active management against 60.1 basis points for comparable mutual funds, a gap that funds the migration.
- A CIT cannot be rolled in-kind to an IRA, so a departing participant must sell to cash, accept time out of the market, and rebuild at retail pricing.
- Target-date assets grew 20.3% in 2025 and managers collected roughly $580 million more in revenue, even as per-dollar fees fell.
What Morningstar’s 2025 Report Found
Morningstar’s annual target-date study put total assets in the category at $4.8 trillion at the end of 2025, a 20.3% jump over the prior year driven by strong markets and steady payroll contributions. Inside that total, collective investment trusts now hold 54%, having passed mutual funds for the first time in 2024 and widened the lead since.
The launch data tells the cleaner story. All 21 new target-date series that came to market in 2025 were CITs. Several were built directly on existing mutual fund lineups, including strategies from T. Rowe Price, so the same portfolio manager runs the same glide path inside a different legal shell. The asset managers are not changing what they manage. They are changing what they sell it in.
Concentration remains extreme. Vanguard oversees about $1.8 trillion, or 37% of all target-date assets, and led growth in 2025 by adding $35.9 billion, followed by Capital Group at $24.0 billion and State Street at $22.2 billion. The five largest providers control roughly 80% of the category. Fidelity and Capital Group still dominate the mutual fund side, while State Street and BlackRock have built commanding positions in CITs. The split is becoming a fault line: legacy mutual fund shops versus the trust-first players capturing the new flows.
Why Are Plan Sponsors Choosing CITs Over Mutual Funds?
The honest answer is cost, and the gap is wide enough to override inertia. Industry data puts the average CIT at 23.9 basis points for active management against 60.1 basis points for a comparable mutual fund, with passive CITs running roughly half the cost of their fund equivalents. On a glide path a participant holds for 40 years, that spread compounds into real retirement dollars.
A concrete example shows the mechanics. A $5 million 401(k) plan using a target-date mutual fund with a 0.45% expense ratio can move to the CIT version of the same strategy and land at 0.30%, a 15 basis point cut with no change to the underlying portfolio. For a plan fiduciary weighing the duty to control costs, that is a documented saving that is hard to argue against.
CITs also give sponsors negotiating room a mutual fund cannot. A fund must charge the stated expense ratio printed in its prospectus for each share class. A CIT, governed by the Office of the Comptroller of the Currency or state banking regulators and built only for qualified retirement plans, can be priced by negotiation between the trustee and a large plan. A jumbo plan that brings scale can cut a fee a mutual fund share class would never publish. For the consultants advising those plans, the CIT is simply the cheaper, more flexible tool, and ERISA’s cost-consciousness pushes them toward it every search cycle.
The Fee Gap That Built a $4.8 Trillion Migration
The same fee advantage that helps participants squeezes the managers, and the second-order effects are showing up in the 2025 numbers. Morningstar reported that target-date managers collected about $580 million more in revenue in 2025 than the year before. Read quickly, that looks like a healthy, growing business. Read against the asset base, it looks like a treadmill.
One basis point on $4.8 trillion is $480 million of annual revenue. So the industry’s entire $580 million revenue gain for the year amounts to roughly 1.2 basis points of the asset base, captured during a year when assets grew 20.3%. The growth created the revenue. Pricing, measured per dollar managed, kept falling. Managers are running hard to stand still, adding hundreds of billions in assets to book a revenue gain that a single basis point of pricing power would have matched.
That math explains why the giants treat target-date share as existential. At Vanguard’s $1.8 trillion, even a sliver of the category is worth fighting for, and the CIT is the weapon because it wins the fee comparison that decides plan searches. The fee compression sweeping retirement plans is the same force behind the broader wave of expense-ratio cuts across fund complexes, and it is reshaping the mutual fund wrapper from the inside out, much as the shift toward ETF share classes is doing on the taxable side.
What Happens When a Client Rolls a CIT Out of the Plan?
This is the part advisors feel directly, and it rarely makes the marketing. A collective investment trust exists only inside qualified retirement plans. It has no public ticker, no daily price you can pull up on a retail platform, and no ability to be held in an IRA or a brokerage account. When a participant leaves an employer and wants to roll over, the CIT cannot move in-kind.
The practical sequence matters. The participant must sell the CIT position to cash inside the plan, move the cash to the IRA, and rebuild the allocation there in whatever vehicles the new account offers. That round trip carries two costs the glossy fee comparison ignores. The first is time out of the market between the sale and the repurchase, a window where a sharp up day is lost return the participant never recovers. The second is pricing: the institutional glide path the participant enjoyed at 0.30% inside the plan is usually rebuilt in retail mutual fund shares or ETFs at a different, often higher, cost once the money lands in the IRA.
For an advisor onboarding a client’s old 401(k), the CIT also complicates diligence. There is no prospectus to read, no Morningstar category rating on many of these trusts, and limited public holdings disclosure, because CITs answer to banking regulators and ERISA rather than the Securities and Exchange Commission. The advisor benchmarking a client’s prior plan, or defending a rollover recommendation under the fiduciary rules that govern that advice, is working with thinner public information than a mutual fund would provide. Cheaper inside the plan, harder to evaluate and move outside it. That trade-off belongs in the rollover conversation, not buried under a headline expense ratio.
Where Does This Leave the Mutual Fund?
The mutual fund is not disappearing from retirement plans, but its role is narrowing to the places where the CIT cannot reach. Small plans without the scale to access institutional trust pricing still default to funds. Plans that value the daily liquidity, public reporting, and participant familiarity of a registered fund keep them. And the rollover IRA market, where tens of billions leave plans every year, remains mutual fund and ETF territory by structure, since a CIT cannot follow the money out the door.
That last point is the quiet opportunity for asset managers and advisors alike. Every dollar that exits a plan as a forced CIT liquidation is a dollar looking for a new home, and the firms that capture rollovers with strong fund and ETF lineups recapture assets the trust wrapper had to release. The migration into CITs inside plans and the migration into funds and ETFs at rollover are two sides of the same flow. The same retirement system that pushes savers into auto-enrollment defaults and escalating contributions under current rules is also the one that forces a liquidation event the day they leave, and the 2026 contribution and catch-up limits keep feeding fresh money into the default at the front end.
Three Questions for the Next Plan Committee Review
The CIT shift rewards committees and advisors who ask precise questions before the next search or rollover, rather than defaulting to the cheapest line on a fee chart.
1. Is the CIT version of our target-date series actually cheaper after all-in costs, and by how much? Pull the trust’s negotiated fee against the mutual fund share class the plan could otherwise access, and confirm the saving survives any wrap, custody, or recordkeeping adjustment. A 15 basis point headline gap sometimes narrows once the full plan economics are counted.
2. How will we evaluate a trust with no prospectus and limited public data? Decide in advance what diligence file the committee needs, holdings disclosure, audited performance, trustee oversight, so the decision rests on documentation rather than a manager’s marketing deck.
3. What does a participant rollover actually cost in this vehicle? Map the liquidation-to-cash sequence, the time out of the market, and the retail pricing a departing participant faces, then make sure the plan’s education materials describe it honestly before the participant learns it the hard way.
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