Life Cycle Funds Analysis

Life cycle funds update - November 2005

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As reported in our November 2005 Newsletter, Life Cycle or Target Date funds are new in Canada for 2005. Here is a table summarizing the first four widely available offerings.

	Fidelity Clearpath	Clarington Target Click	Russell Lifepoints	Scotia Vision
Inception Date	November-05	February-05	July-05	June-05
Portfolios	2005, 2010, 2015, 2020, 2025, 2030, 2035, 2040, 2045	2010, 2015, 2020, 2025	2010, 2020, 2030	Conservative and Aggressive versions 2010, 2015, 2020, 2030
Minimum	$500	$500	$5,000	$5,000
Illustration (.pdf or site)
Invests In:	16 Fidelity Funds, Diversified by style, asset and manager	1 ABN Ambro Global Equity Exposure (leveraged) Fund, Gov"t Bonds	5 Funds, Diversified by style, asset and manager	14-15 Scotia Funds, Diversified by style, asset and manager
Allocation Shifts	Non-Linear Dynamic Rolldown from Equity to bonds	Passive bond component increases with each "target click" - non linear	Linear, fixed income increases regularly	Linear, fixed income increases regularly, Consultant: Ibbotson Associates
Guaranteed Maturity Value	No	Yes - based on last "click"	No	No
Management Fees	Declines from 2.35% to 1.6%	Declines from 2.6% to 1.15%	2.10%	Declines from 2.05% to 1.6%
Rebalancing	Daily if variance +/-3%	Annually	If variance +/-2.5%
Rollover Event	Into Fidelity Clearpath Income Portfolio 10 years after Maturity	Client receives highest month end NAV, MER at lowest point, max fixed income	Fixed Asset Allocation 20 years after target date.	Into Scotia Money Market fund 1 year after maturity
Features	More dates and underlying diversification	"Click" feature increases guaranteed value each time month end NAV increases		Two versions of each fund, aggressive has 10% more equity
More Information	Fidelity Clearpath Site	Clarington Target Click Site	Russell Life Points Site	Scotiabank Vision Funds Site

(Note, RBC Education Funds are no longer available, and Ethical Funds recently announced a similar product.  We'll update this site with information in the future.)

Each of the funds has strengths and the overall concept is very good.  We like the idea of the guarantee on the Clarington funds, but until the ownership and future for the Clarington group is finalized, we will hold off on that recommendation. 

For now, the Fidelity funds seem to be the best choice.  This is a conclusion based on the above analysis, but even more so based on the solid track record of the one of the largest funds in Canada, a fund we have been recommending for years, the Fidelity Canadian Asset Allocation fund.  This fund (along with others in the US) seems to demonstrate Fidelity's strength in the Asset Allocation field.

Please contact us to review the appropriate Target Date fund for your situation.  This table compiled by Carl Spiess, Director, Wealth Management, ScotiaMcLeod, based on information provided by the fund companies at time of writing.