Guardian Capital Unveils Modern Tontine

Guardian Capital LP on Wednesday introduced a suite of products, including a modern tontine, aimed at solving what the firm calls a misalignment between human and portfolio longevity.

The products, designed for Canadian investors, were developed with financial industry consultant Moshe Milevsky, finance professor at York University in Toronto and author of a new open-access book, “How to Build a Modern Tontine: Algorithms, Scripts and Tips” (Springer-June 8).

They seek to ensure retirees have enough income to meet their current needs while not outliving their nest egg, according to Guardian Capital.

“I’m so proud to be part of these made-in-Canada solutions, which address the biggest risks facing retirees and are among the first of their kind globally,” Milevsky said in a statement.

“Based on hundreds of years of research and improvement and backed by Guardian Capital’s 60-year reputation for doing what’s right for Canadian investors, I am confident these solutions will revolutionize the retirement space,” he said.

In a traditional tontine, a group of people fund an annuity, with payouts to survivors growing as each participant dies. Milevsky recently told ThinkAdvisor that the modern version he helped create is structured as “a garden-variety mutual fund, which you can purchase but never exit.”

While the new funds are only open to Canadian investors, researchers suggested in a recent paper that modern tontines could compete with annuities in the U.S. Tontine arrangements remain common in France.

Here’s how Guardian Capital describes its new GuardPath Longevity Solutions:

• GuardPath Managed Decumulation 2042 Fund: This solution is specifically designed to optimize the utility of invested capital during retirement. It seeks to deliver attractive and steady cash flow over 20 years through sophisticated risk management techniques aimed at extending portfolio longevity.

• GuardPath Modern Tontine 2042 Trust: The first investment solution of its kind in Canada seeking to deliver financial security to retirees in their later years of life through significant payouts to surviving unitholders in 20 years, based on compound growth and the pooling of survivorship credits.

• Hybrid Tontine Series: Combines the strengths of the GuardPath Managed Decumulation and the GuardPath Modern Tontine to offer a holistic solution for an entire retirement. This first-of-its-kind solution is specifically designed to:
  • Optimize the utility of invested capital during retirement through steady cash flow for 20 years.
  • Provide significant payouts to surviving unitholders in 20 years.

“With our modern tontine, investors concerned about outliving their nest egg pool their assets and are entitled to their share of the pool as it winds up 20 years from now,” said Barry Gordon, managing director, head of Canadian Retail Asset Management, Guardian Capital.

“Over that 20-year period, we seek to grow the invested capital as much as possible to maximize the longevity payout. Along the way, investors that redeem early or pass away leave a portion of their assets in the pool to the benefit of surviving unitholders, boosting the rate of return,” he added.

“All surviving unitholders in 20 years will participate in any growth in the tontine’s assets, generated from compound growth and the pooling of survivorship credits. This payout can be used to fund their later years of life as they see fit, and aims to ensure that investors don’t outlive their investment portfolio,” Gordon said.

The number of people in Canada aged 85 and older has doubled since 2001, and projections suggest the number could triple by 2046, according to Guardian Capital.