Segregated Fund

What is the segregated fund and who is offering it?

Segregated Fund (Seg Fund) is a type of investment (fund) administered by Canadian, Ontario insurance companies in the form of individual. Universal life insurance contracts offering certain security to the policyholder for the Sef fund investment portion plus coverage pay to the beneficiary. Also in Whole life the cash value part is invested in segregated fund with guarantee.

What is the difference between segregated fund and mutual fund?

Segregated funds offer many advantages that mutual fund do not. A segregated fund is an investment fund that combines the growth potential of a mutual fund with the security of a life insurance policy. It’s an investment contract, considered insurance by-law and assets of seg-funds are not part of the general resources of the insurance company. Depending on its contract, a seg-fund may allocate the assets to a fund of: treasury bills, common shares, bonds, real estate or mortgage like a mutual fund.

What is the similarity between Seg fund and mutual fund?

Some futures are shared between segregated fund and mutual fund like:

  1. Professional management
  2. The ability to invest regularly in small dollar amount.
  3. Regular statements and reports.
  4. Diversification.
  5. The ability to be a registered plan such as RRSP.
  6. Automatic reinvestment of allocations.
  7. The ability to transfer between funds under one management umbrella.

What are the exclusive features of segregated fund?

Some features are exclusive for segregated funds like:

  1. Maturity guarantee (70% to 100% of principle).
  2. Death benefit guarantee.
  3. Creditor protection.
  4. Bankruptcy protection.
  5. Reset option.
  6. Favorable tax treatment which capital losses can be deducted from capital gain.
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