Segregated Funds

​Typically, when people think about investing, they think of banks, hedge funds, and private equity firms. However, what many don’t realize is that insurance companies make the majority of their profits through investment. As people pay their insurance premiums a large pool of money is formed which is used to pay out claims. Thus, when people are not making claims an insurance company is able to invest the premiums to generate profits. Some insurance companies also sell financial instruments that individuals can purchase and include as a part of their personal investment portfolio. One of these financial instruments is called a segregated fund which is similar to a mutual fund. Segregated funds are primarily sold by Canadian insurance companies and offer moderate returns on investment along with the benefits associated with a life insurance policy. This means that they are mainly sold by life insurance companies such as Canada Life, Manulife, and Sun Life.
 
Segregated funds are structured as deferred variable annuity contracts that hold life insurance benefits. A variable annuity is a contract whose value varies based on the performance of an underlying portfolio of smaller accounts known as sub accounts. These underlying portfolios are typically designed to be safer than most investment options with more modest returns as they are often owned by pensioners who cannot afford to lose their retirement savings. An example of a company who manages segregated funds is GWL Realty Advisors which is one of the investment divisions of The Canada Life Assurance Company. Canada Life is the result of a recent merger between The Great-West Life Assurance Company, London Life Insurance Company, and The Canada Life Assurance Company. GWL Realty Advisors currently has $18.5 billion in assets under management (AUM). Their portfolio mainly consists of property management teams and real estate development projects. These are safe investments that can guarantee steady returns for those who have invested in the segregated fund.
 
The major benefit of segregated funds over traditional mutual funds is that they offer a guarantee of 75% to 100% of the principal investment upon death which is directly paid to the beneficiary named on the policy. However, to maintain this guarantee you must keep the contract until maturity which typically ranges anywhere from 10 to 20 years. Segregated funds also typically have higher management expense ratios (MERs) than mutual funds which are fees charged by the fund to cover operating expenses. 
 
Segregated funds are just one example of how the insurance industry offers career paths for those who are interested in investments, real estate management, and pension funds. Through RCIA you will have the opportunity to network and become more familiar with these opportunities which will be presented to you at our events during the school year.