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Guardian longevity funds target investors seeking retirement security

The GuardPath Modern Tontine 2042 Trust is designed to provide a lump-sum payout to investors in 20 years based on compound growth and the pooling of survivorship credits. Investors who die or redeem early leave a portion of their assets in the pool. For example, if an investor dies between 2022 and 2025, their estate gets 95% of their net asset value (NAV) at that time. If they die or redeem in 2032, their estate gets 50% of the NAV.

The fund is only available to investors born between Jan. 1, 1957 and Dec. 31, 1961. The fund will wrap up after 20 years because roughly 50% of people born within that range are expected to survive until 2042, said Barry Gordon, head of Canadian retail asset management with Guardian Capital.

Guardian wanted to avoid the “last person standing” problem, Gordon said, in which only a small fraction of the original investors actually survive to receive the lump sum payout. The amount in the pool in 2042 depends in part on investors’ mortality rate.

“There’s a sum of money that you can then decide what you want to do with — give it to the grandkids, buy an annuity, move into a nursing home, buy a sailboat,” said Moshe Milevsky, a Schulich School of Business professor and chief retirement architect for the GuardPath products.

In order for the tontine trust to achieve its hoped-for payout of roughly $550,000 in 2042 on an initial $100,000 investment this year, Guardian assumes 6.92% compounded returns each year, Gordon said.

Guardian also released the GuardPath Managed Decumulation 2042 Fund, which is intended to provide steady cash flow in the form of monthly distributions over 20 years. The fund targets 8% cash flow in the form of income, capital gains and return on capital. The basic intent of the fund is to have none of its assets left over by 2042, Gordon said, and there’s no age restriction for investors. Investors who redeem get the current NAV per unit at the time of redemption.

The firm also launched the Hybrid Tontine series, which combines elements of the tontine and decumulation funds, splitting the income between cash paid to investors and purchases of Modern Tontine 2042 Trust units. This is so Hybrid Tontine investors can get both a stream of income over 20 years and a share of the tontine trust in 2042, if they live that long.

GuardPath is intended to be “part of a holistic planning process alongside other investments used to achieve life goals,” Gordon said.

Purpose Investments Inc. released a longevity-focused mutual fund last year that addressed some of the same retirement income concerns as the Guardian funds. The Longevity Pension Fund has characteristics of an annuity or pension plan, with monthly lifetime distributions when investors turn 65.

The GuardPath Modern Tontine 2042 Trust is available in A and F series and has a low to medium risk rating.

The GuardPath Managed Decumulation 2042 Fund is available as an ETF (TSX: GPMD) and two mutual fund series (plus two series of the Hybrid Tontine), with a low risk rating.

The annual administration fee for the funds is 0.10%.