Making sense of the markets this week: September 18
- GuardPath Managed Decumulation 2042 Fund: It seeks to deliver attractive and steady cash flow over a 20-year period through sophisticated risk management techniques aimed at extending portfolio longevity.
- GuardPath Modern Tontine 2042 Trust: It aims to provide significant payouts to surviving unitholders in 20 years based on compound growth and the pooling of survivorship credits.
- Hybrid Tontine Series: This combines the strengths of the GuardPath Managed Decumulation and the GuardPath Modern Tontine to offer a holistic solution for the entirety of retirement.
Let’s take a look at an example of my favourite option: the Hybrid Tontine Series. Guardian Capital provides a free calculator for use on its site.
So, this calculator is saying if you invested $100,000 in this product today (and would have to be born between January 1, 1957 and December 31, 1961 to be eligible) then Guardian Capital estimates you will receive $6,500 in distributions each year. Then, if you haven’t yet gone to the “great tax haven in the sky” 20 years after you make the investment, you will be eligible to receive a lump-sum “tontine” payout. In this example case, you’d get $81,783 at a time in your life when many Canadians are worried about increased expenses.
When I asked Guardian Capital about the assumptions behind their returns, they responded by stating, “Guardian assumptions are, in our view, based on sound actuarial principles and conservative market outlooks.”
I believe it’s a fair assessment. To be honest, the combination of actuarial math and investment return probabilities are pretty complex math to be checking. Personally, I think this is worthwhile for investors to look into, though, especially if they want to ease their minds when it comes to longevity risk (outliving their nest egg) while at the same time having the comfort of someone else managing their money in a responsible manner.
A quick note for those interested in this unique product. The Series A version of the fund has a management fee of 1.35% whereas the Series F version has a management fee of 0.60%.
That’s a pretty sizable difference worth investigating.
Want to know more? MoneySense columnist Jonathan Chevreau is working on a tontines feature. Stay tuned.
Money doesn’t buy happiness… but it sure has a high correlation
Our friends from Visual Capitalist are back this week, showing the relationship between a country’s average wealth per resident (data courtesy of Credit Suisse).