While the managed decumulation fund and the tontine trust are ground-breaking solutions, Gordon stresses that they are meant to complement other income products in a portfolio. Like all mutual funds, they are governed by National Instrument 81-102, and their underlying strategies are generally well-recognized, tried-and-true approaches.
The decumulation fund is designed to last for 20 years; it aims to provide a steady stream of monthly distributions, with the express purpose of drawing down to zero at the end of its lifetime. That’s intended to help Canadians overcome one of the biggest reasons why individuals don’t live their retirement to the fullest.
“Behavioural research shows that when someone has a large sum of wealth, they tend to be fearful of spending it. But if they get that wealth in little pieces over time, they’re more likely to spend it,” says Professor Moshe Milevsky, PhD (above, right), who collaborated with Guardian Capital in developing the GuardPath funds. “It was not just about converting their mindset, but also making it easier for them not to fall prey to these behavioural obstacles.”
The tontine fund, meanwhile, is purpose-built for another related challenge of retirement: how can retirees be assured that they won’t outlive their investment portfolio?
To solve that problem, Guardian Capital found inspiration from tontines of the 16th century, which were essentially a macabre bet: a group of individuals would each contribute to a pot of money, which would ultimately go to the last one alive among the group.
