A segregated fund is an investment pool structured as a deferred variable annuity and used by insurance companies to offer both capital appreciation and death benefits to policyholders.

The biggest advantage of the segregated fund is that it has the function of protecting the investor's principal. The product contract stipulates that within the agreed period (usually ten years), the principal invested by the investor at the maturity date, if the investment principal shrinks, the agreed principal guaranteed (75% or 100%); if the holder dies before the expiration of the contract, the designated beneficiary will be paid the higher of the market value of the share and the guaranteed principal. Therefore, it can be regarded as a mutual fund with life insurance protection, which has the dual nature of fund capital appreciation and death insurance.


What are the advantages over mutual funds?

  • Maturity and death benefit guarantees (up to 100% principal protection)
  • Resets to lock in your market gains
  • Asset inheritance (the beneficiary directly obtains the assets, eliminating the inheritance procedures and fees)
  • Creditor and liability protection (protection from creditors’ claims and liquidation)
  • Privacy protection (prevent others from viewing)

Of course, while the principal is guaranteed, the management fee (MER) of the segregated fund is 0.2-1% higher than that of the mutual fund. In addition, the contract period generally takes 10 years, which is a long-term investment.

Guarantees of the segregated fund generally have three series, the capital preservation level is 75/75, 75/100 and 100/100, the number in front of the slash is Maturity Guarantee, and the number behind is Death Benefit Guarantee. For many people, the maturity guarantee is of little significance, because it usually expires after 10 years; but the death guarantee is valued by most investors, because no one can predict the risks of life and their own lifespan. If you choose the 100% death guarantee fund type, you can pass on 100% capital preservation to your loved ones in case of unfortunate accidental death, no matter whether the investment is lost or not!