The Segregated Fund is like a mutual fund as you are pooling your money with other people to share investment gains. Segregated Fund policies guarantee that most of your initial investment is protected in the event of death or at the time of maturity. Depending on the provider, this guarantee may vary from 75% to 100% of the principal amount. Think of such an investment as a mutual fund with a safety net.
A Segregated Fund is actually an insurance contract with two parts:
An investment that produces the return
An insurance policy that covers the risk
Product Features and Benefits
Feature
Benefit
Professionally and actively managed
Potentially significantly greater rates of return than interest bearing accounts without the risk of loss of principal
Variety of insurance companies issuing funds
Many different options available that can be geared to practically anyone’s circumstance
Variety of funds geared to different risk tolerances
The comfort knowing your money is being professionally managed
The ability to have RRSP, RRIF, RESP, TFSA, and other Registered Segregated Fund plans
Diversified by many securities allowing volatility risk to be lower than single equity options
Being an insurance product one can designate beneficiaries allowing for the passing of assets to your heirs quickly, without probate costs or legal fees
Significant estate planning advantages
Under most conditions the investment is creditor protected
Significant year over year tax advantages as compared to GICs / term deposits
Depending on the fund, it guarantees the principle to 75% or 100% while still benefiting from the returns of equity and debt instruments
Some Segregated Funds allow for periodic re-sets which lock in investment gains
Segregated Funds do come at a higher cost than most mutual funds
