EN 
FR Segregated Funds
What are Segregated Funds?
Segregated funds are investment products offered by insurance companies that combine the growth potential of mutual funds with the security of insurance guarantees. These funds provide a variety of investment solutions with different levels of guarantees, either at maturity or upon death. The guarantees typically protect a portion of the initial investment, ensuring that a specified percentage is returned to the investor or their beneficiaries, regardless of market performance.
Key Features of Segregated Funds
Investment Growth: Similar to mutual funds, segregated funds invest in a diverse portfolio of assets, offering the potential for growth.
Insurance Guarantees: They come with maturity and/or death benefit guarantees, usually guaranteeing 75% to 100% of the original investment.
Creditor Protection: In certain situations, segregated funds may offer protection from creditors, making them an attractive option for business owners and professionals.
Estate Planning Benefits: Upon death, the proceeds from segregated funds can bypass probate and be paid directly to the beneficiaries, ensuring a quicker and smoother transfer of assets.
Variety of Options: Investors can choose from a range of segregated funds that match their risk tolerance, investment goals, and time horizon.
Types of Segregated Funds
- Equity Segregated Funds:
- Invest primarily in stocks, aiming for capital growth over the long term.
- Suitable for investors with a higher risk tolerance and a long investment horizon.
- Fixed Income Segregated Funds:
- Focus on bonds and other fixed-income securities.
- Ideal for investors seeking stable income and lower risk compared to equity funds.
- Balanced Segregated Funds:
- Combine investments in both stocks and bonds.
- Offer a balanced approach, providing growth potential with reduced volatility.
- Money Market Segregated Funds:
- Invest in short-term, low-risk securities like treasury bills and commercial paper.
- Suitable for conservative investors looking for liquidity and capital preservation.
- Specialty Segregated Funds:
- Focus on specific sectors or themes, such as real estate, technology, or healthcare.
- Allow investors to target specific industries or trends.
- Global and International Segregated Funds:
- Invest in international markets, offering exposure to global economic opportunities.
- Ideal for diversifying investments geographically.
- Dividend Segregated Funds:
- Invest in dividend-paying stocks and aim to provide regular income.
- Suitable for investors looking for a combination of income and growth.
- Target Date Segregated Funds:
- Designed to become more conservative as the target date (such as retirement) approaches.
- Suitable for long-term planning, aligning investments with a specific time horizon.
- Guaranteed Investment Accounts (GIAs):
- Focus on preserving capital while providing a guaranteed interest rate.
- Suitable for conservative investors seeking security and steady returns.
- Ethical or Socially Responsible Segregated Funds:
- Invest in companies that meet certain ethical, environmental, or social criteria.
- Ideal for investors who want to align their investments with their values.
Segregated Funds FAQ's
Segregated funds offer a combination of investment growth potential and insurance guarantees, protecting a portion of your initial investment at maturity or upon death. They also provide creditor protection and can bypass probate, making them advantageous for estate planning.
Guarantees typically ensure that 75% to 100% of your initial investment is returned either at the fund’s maturity date or upon your death, regardless of market performance. These guarantees provide a safety net for your investment.
Yes, segregated funds can be included in registered plans such as Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs), allowing you to benefit from their tax-advantaged status while also enjoying the unique benefits of segregated funds.
Segregated funds often have higher fees compared to mutual funds due to the additional insurance guarantees and benefits they provide. It’s important to evaluate whether the added security and features justify the cost for your individual financial situation.
