A Guide To Canadian Segregated Funds

The term "Mutual Fund" is often used to describe a wide variety of investment funds where the investment capital from a large number of investors is "pooled" together and invested in specific stocks, bonds, mortgages, etc. Since 1961 Canadian life insurance companies have been the source of "Segregated Funds", the insurance companies' version of Mutual Funds, with some similarities and many important differences.

This website is about segregated funds and their extraordinary guarantees. Segregated funds are a Canadian insurance product and are only offered to Canadians.

When I first became involved with segregated funds in 1986, these funds were almost exclusively transactions between Canadian insurance companies and large pension fund managers. By the mid 1990's, the existence of these products was still not well known. In fact, up until 1997, occasional articles would show up in the financial sections of various newspapers describing segregated funds as little known but important investment vehicles. Segregated funds were yet to catch the eye of the public.

In 1998 Mutual fund companies realized the potential in segregated funds and began to make arrangements with life insurance companies to create new segregated funds which mirrored the performance of their own mutual funds and could be aggresively marketed by the mutual funds agents. Since, under existing legislation, only life insurance licensed brokers could legally sell these funds, mutual funds agents quickly obtained life insurance licenses.

During the last several months of 1998 there was a proliferation of new advertising from many new and existing segregated funds companies. Less than a year later, it was learned that the Federal Insurance regulators were taking a closer look at segregated funds and they subsequently sent out directions to all insurance companies issuing segregated funds to increase their reserves to protect existing owners and new purchasers of segregated funds. This resulted in increased costs to administer these kinds of funds and some of the mutual fund companies changed their minds about pursuing these investments. Those companies still offering segregated funds have re-worked their products for this new market place. While the changed segregated funds contracts may not be as liberal as before, some companies still have significant guarantees that are worth consideration.

All segregated funds are not the same. What they do have in common is a minimum 75% guarantee of initial investment capital at fund maturity or death of policy holder. Very few segregated funds are unique in that they have 100% guarantee of investment capital at fund maturity or death of policy holder. There are very few segregated funds remaining with 100% guarantees. Very few segregated funds offer a reset [lock-in] of any kind when value of an investment increases.

I have focused the information in this web site one of the original major Canadian segregated fund companies that still offers 100% death and maturity guarantees, along with a yearly reset of the death benefit which enhances the guarantees.

Should you purchase segregated funds through this website I make certain that your deposits into any of the segregated funds that I recommend are place on a non-sales charge/no-load basis. The segregated fund recommendations on this web site will make certain that you optimize your investments safely and securely.

Subject to the applicable death and maturity guarantees, any part of the premium or other amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value according to fluctuations in the market value of the assets in the segregated fund.

Segregated Funds are only available to Canadian residents. Persons resident or located in other countries are not eligible to purchase these products or associated services. Within Canada, the information on this web site is not intended to be construed as an offer to sell any insurance products in the province of Quebec.

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