MFS Investment Management Canada has altered its LifePlan target date funds.
Changes were made, says the company, since people’s retirement planning needs have shifted in the past decade. As such, its new funds won’t base asset allocation decisions solely on pre-set factors such as a typical investor’s age of retirement, life expectancy, and saving and spending habits.
Instead, the funds will also consider individual investors’ risk tolerances and objectives.
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The MFS LifePlan Funds will invest in a diversified portfolio of actively managed MFS Canadian equity, global equity, fixed income and real estate funds. They’ll be managed by a team at the company.
The funds will be globally diversified since “many Canadian investors [already] have significant exposure to local equity markets,” says Shawn Cohen, director of relationship management at MFS. “For young and middle-aged investors, this home country bias can have a significant impact on retirement portfolios in the event of a local downturn.”
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For investors who are retired, however, he finds, “Increased home-country bias centered on fixed income can actually help limit short-term volatility, minimize currency risks and provide a steady income stream.”
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So as investors approach retirement, the allocation of their funds will shift to a greater weighting in Canadian fixed income investments. But still, the funds will maintain about 27% equity weighting during people’s final retirement stages since most people aim to generate modest growth and income at that point.
Check out the chart below to see how the weighting of the funds will change over time.
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