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What is a segregated fund?

Segregated funds: Offered only by insurance companies, they give access to the growth potential of the markets, and their guarantees may mitigate volatility.

3 min. read

You’re ready to invest but are worried about volatility, and your advisor has recommended a segregated fund. Or you’ve read an article about the estate planning advantages of these funds and think the benefits would suit your needs. But you might still have questions about what a segregated fund is. Let us explain:

A segregated fund (also known as a guaranteed investment fund, GIF, seg fund, or if you want to be extremely formal, an individual variable insurance contract) is an investment product that can only be offered by an insurance company. Think of it as a life insurance contract, but with a focus on insuring your money rather than your life. There are two components to the product:

  1. The investment component - gives you access to the growth potential of the markets.
  2. The insurance component - gives you access to capital guarantees and estate planning benefits.

Let’s explore each component.

The investment component: Tap into growth potential

When you invest in a segregated fund contract, you’re able to choose from a selection of professionally managed funds that, like mutual funds, pool your money with other investors to invest in a diversified portfolio of assets such as stocks, bonds, and other securities. Pooling together builds economies of scale to give you access to opportunities that might not otherwise be available to you. Learn more about the difference between segregated funds and mutual funds.

Together with your advisor, you can choose the investment funds that can help you reach your financial goals.

“Segregated funds may be attractive to investors interested in the growth potential of the markets, and potential downside protection from volatility.”

The insurance component: Help mitigate the impact of market volatility

In addition to investment opportunities, segregated fund contracts also offer guarantees that ensure the value of your investments will never be less than a specified percentage when your contract matures (the maturity guarantee), or when you pass away (the death guarantee).

Different insurers offer different guarantee levels and types. With BMO Guaranteed Investment Funds, for example, you can guarantee up to 100% of your investment on maturity or death, or both depending on the options you select. Your contract can include: 

  1. Maturity Guarantee: This guarantee ensures that you will receive back a portion of your initial investment, ranging from 75% to 100%, when the contract matures.
  2. Death Benefit Guarantee: This guarantee ensures that if you pass away, your beneficiaries will receive a minimum of 75% to 100% of the initial investment, depending on the options you choose.
  3. Resets: This feature can help lock in market gains by resetting the guaranteed amount to a higher value if the market value of the fund increases. This may increase the value of your guarantees.

Remember that all investment products involve costs of some form, and segregated funds are no different. There may be different fees associated with the contract type, guarantee level, and funds that you choose.

Finally, the insurance component provides estate planning benefits, making segregated funds an efficient wealth transfer tool. Segregated funds also offer potential creditor protection.1 This aspect may be of particular appeal to professionals and business owners.

Looking for more detail on wealth transfer? This video gives a high-level overview of how the estate planning and other segregated fund benefits work. 

Investing can be a tricky business, with many risks and uncertainties. Segregated funds may be attractive to investors who want to tap into the growth potential of the markets, while also enjoying downside protection from volatility. As with any investment, it's essential to do your research and consult with your advisor to find a solution that works for you.

Learn more about segregated funds

Protect your retirement savings, access growth potential and guarantees.

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Have Questions?


1Creditor protection rules depend on legislation and vary by province. It cannot be guaranteed. Consult a legal advisor for your specific situation.