Segregated Funds

What Is a Segregated Fund?

A segregated fund is a type of investment vehicle commonly used by Canadian insurance companies to manage individual, variable annuity insurance products. A segregated fund offers investment capital appreciation and life insurance benefits.

Investors can expect to pay a slightly higher total expense ratio on segregated funds due to their more complex structure. Additionally, these fund offerings typically do not have aggressive fund objectives. Therefore, returns from the funds tend to be more modest.

Key Takeaways

  • 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.
  • Commonly found in Canada, segregated funds are private contracts between insurers and customers that must be held until contract maturity.
  • Because these products offer better guarantees than traditional insurance or annuity products, they do come with higher fees and expenses.