A segregated fund, also known as a “seg fund,” is like a mutual fund, but with insurance guarantees that protect your investment capital when the fund matures or if you die before the fund matures. In other words, even if the underlying fund loses money, you are guaranteed to get back 75% to 100% of your principal investment.
These built-in guarantees make seg funds an important investment option—especially for estate planning and creditor protection.
Let’s say you are an older client and you want to set aside tax-free money for a particular beneficiary, but you don’t want that money to be caught up in probate. You want your money invested for your heirs, not for yourself. You want to “grow the money” for the future rather than preserving it. A seg fund fits the bill.
Because they are a type of insurance policy, seg funds offer protection from creditors. Business owners, as well as professionals who face the risk of malpractice litigation, may find this feature attractive.
Let’s talk about segregated funds.