Domain Knowledge in Segregated Fund

A Segregated Fund or Seg Fund is a type of investment fund administered by Canadian insurance companies in the form of individual, variable life insurance contracts offering certain guarantees to the policyholder such as reimbursement of capital upon death. As required by law, these funds are fully segregated from the company’s general investment funds, hence the eponym. A segregated fund is synonymous with the U.S. insurance industry “separate account” and related insurance and annuity products.

A segregated fund is an investment fund that combines the growth potential of a mutual fund with the security of a life insurance policy. Segregated funds are often referred to as “mutual funds with an insurance policy wrapper”.

Like mutual funds, segregated funds consist of a pool of investments in securities such as bonds, debentures, and stocks. The value of the segregated fund fluctuates according to the market value of the underlying securities.

Segregated funds do not issue units or shares; therefore, a segregated fund investor is not referred to as a unitholder. Instead, the investor is the holder of a segregated fund contract. Contracts can be registered (held inside an RRSP or TFSA) or non-registered (not held inside an RRSP or TFSA). Registered investments qualify for annual tax-sheltered RRSP or TFSA contributions. Non-registered investments are subject to tax payments on the capital gains each year and capital losses can also be claimed.

Other information:

Segregated funds are sold as deferred variable annuity contracts and can be sold only by licensed insurance representatives. Segregated funds are owned by the life insurance company, not the individual investors, and must be kept separate (or “segregated”) from the company’s other assets. Segregated funds are made up of underlying assets that are purchased via the Life assurance companies. Investors do not have ownership share. Segregated Funds have guarantees and run for a period. Should the investor leave before the end date, he/she may be penalized.

Transfer Agency:

Definition from Investopedia- A trust company, bank or similar financial institution assigned by a corporation to maintain records of investors and account balances and transactions, to cancel and issue certificates, to process investor mailings and to deal with any associated problems (i.e. lost or stolen certificates).

Advertisements

Author: Srini

Experienced software developer. Skills in Development, Coding, Testing and Debugging. Good Data analytic skills (Data Warehousing and BI). Also skills in Mainframe.