What is a Segregated Fund?

Most people have heard of mutual funds, since they are sold at the bank / branch level. You walk into your branch, they try to cross sell you, and the subject of mutual funds always comes up when it comes time to investments. Segregated funds hold the same concept as mutual funds, however, they are sold only through insurance companies, which means that these investment products can only be sold through your Team Levine insurance broker. Both products are based on the same concept, where many people invest their money into a pool of different types of funds / investments. You can invest in the stock market, bonds and different forms of securities. It all depends on your investor profile, you can invest in a conservative manner, an aggressive manner or for those in between, a balanced manner. Since the concept for both mutual funds and segregated funds are the same, you may be asking yourself what segregated funds bring to the table. In fact, segregated funds have several advantages, beyond the capacity of mutual funds, since insurance companies have setup and manage segregated funds.

What is a Segregated Fund?

A segregated fund is created and managed through an insurance company. It is called a segregated fund, because the fund is kept separate from the insurance companies life insurance funds. Meaning that all money from investors are setup in a completely different pool of funds, managed solely by a team of investment fund specialists.

Advantages of a Segregated Fund

• Under certain circumstances, segregated funds are protected against bankruptcy. Meaning that in the case of bankruptcy, creditors are unable to seize your assets within a segregated fund. Many business owners like segregated funds for this reason, as it is a form of asset protection in case the business goes sideways. The reason that there is this creditor protection is because a segregated fund is an insurance product, which means beneficiaries of the policy have priority.
• Segregated funds also guarantee a certain percentage of your investment. This is a great safety net, as if you lose money within the fund, you are guaranteed not to go below a certain percentage of your original investment, as long as you hold on until maturity of your fund or upon your death. Usually this guarantee is around 75% of your original investment but it can vary. An interesting part about this, is that some funds allow you to reset your guaranteed value of your investment in order to capture growth within the market. You can only use this reset feature, when the value of your fund has surpassed your original investment. When the reset feature is used, the maturity date of your fund gets reset as well.
• Upon your death, not only is a certain percentage of your investment protected for your heirs, but the segregated fund also passes probate. Meaning that your beneficiaries directly get the funds and don’t have to wait for your will to be settled. This allows for more privacy, and more money for your heirs, as this money avoids the will process and therefore avoids any accountant/executor/legal fees.

All of these benefits are possible, as segregated funds are based on life insurance contracts, and therefore receive life insurance perks within the investment.

Does this sound like it could be the product for you? Give Team Levine a call today for a no hassle, free evaluation!