Manulife Financial Corp. launched a new investment category in Canada yesterday, a guaranteed income fund that has rapidly gained acceptance in the U.S. market.
Manulife said that Income Plus is the country's first fund in the guaranteed minimum withdrawal benefit category, a complex offering designed to help retiring baby boomers limit investment risk. The fund provides guaranteed monthly payments independent of where an investor retires in the market cycle. By purchasing the product up to 10 years before withdrawals begin, investors can lock in a minimum income bonus of up to 50 per cent, regardless of how markets performs.
The guarantee comes at a price -- fees are high. For example, the Income Plus version of the Fidelity Monthly Income Fund has an annual management expense ratio of 3.4 per cent.
Research indicates investors are willing to pay a premium to mitigate "a lot of uncertainty" in the market, said Keith Sjogren, director of strategy consulting at Toronto research firm Investor Economics.
The U.S. investment community has embraced the category. Insurance firms introduced the asset class in 2002 and have rapidly gathered about $356-billion (U.S.) in assets. In Canada, it is widely expected that Sun Life Financial Inc., Great-West Life Assurance Co. and other insurance firms will soon launch competing offerings.
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