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It’s controversial. It’s making a comeback. Find out what tontines are, how they work and what all the fuss is about.
Tontines are investment funds named after Lorenzo Tonti, the Italian banker who invented them in 1653. Essentially, it’s when investors own shares in a pooled fund that pays annual dividends. When a shareholder dies, their share of the profits is distributed to the surviving shareholders.
Tontines accounted for nearly two-thirds of the U.S. insurance market until they fell out of favour in the early 1900s following a series of scandals—until recently in Canada.
In 2022, Toronto-based wealth-management firm Guardian Capital LP launched three “solutions” based on tontines. One is a pure tontine solution as described above, another is a decumulation vehicle (converting assets into income in retirement), and the third is a blend of the two.
Example: “Tontines and similar products are currently enjoying a comeback in Canada, viewed as possible solutions to so-called ‘longevity risk’—the risk of outliving your retirement savings.”
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