Segregated Funds

What are Segregated Funds?

Segregated Funds, “Segs” as they are often called are basically the Life insurance industry’s answer to a Mutual Fund.

Segs are an investment vehicle that purchases a variety of stocks, bonds, or other securities.  The company operating the fund then bundles all these securities into a package.  An investor who purchases Seg funds is actually purchasing a piece of the package.  Have you ever been to the grocery store and seen the Kellogg’s Variety Pack?  Seg funds are the Kellogg’s Variety Pack of the investment world.  Rather than a customer purchasing 6 full size boxes of cereal, they can get a small amount of each one in the variety pack.  In this way an investor can spread out their risk with a relatively small investment.  Or; in the case of Kellogg’s,  a cereal lover doesn’t have to have the same thing day after day.

Are there any features specific to Segregated Funds?

Yes.  Because Segregated funds are a Life Insurance product they offer a few specialized features.  They can bi-pass the Estate and Probate process; they can have guarantees placed on them in regard to protecting principle; and they can be structured to protect the investment from creditors.

What about fees?

Similar to mutual funds, Seg funds have a sales charge and an MER (management expense ratio).

What’s a Management Expense Ratio?

 That’s what the insurance company charges the investor to manage the fund on an ongoing basis.  It is usually expressed as an annual percentage that can range from 2%-4%, depending on the type of fund and the guarantees chosen.

How do I find out more information about Seg Funds?

Not all Seg funds are created equal.  Before purchasing one, an investor will sit down with an advisor and review both the benefits and risks to owning a Seg fund.  Most of this information is included in the Information Folder, provided to all prospective investor’s by their advisor.

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