Why do you need segregated funds in your retirement plan?

May 14, 2024

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Segregated funds are a popular choice for group savings and retirement plans. They provide access to high-end and unique investment opportunities, offer innovative diversification, and come with the professional management of a fund manager. Additionally, they offer peace of mind knowing that regulatory bodies are overseeing them. But what exactly are segregated funds, and how can they benefit you and your savings?

Why do you need segregated funds in your retirement plan-money

Understanding Segregated Funds

Segregated funds, often referred to as market-based funds, are single investments composed of a variety of other investments, sometimes numbering in the hundreds. These funds are typically designed and managed by investment professionals with specific goals in mind, such as aiming for higher returns or focusing on stable growth with less risk.

Segregated Funds vs. Mutual Funds

While you may be familiar with mutual funds, segregated funds in your group retirement plan function similarly. The key distinction is that segregated funds are offered by insurance companies, whereas mutual funds are provided by banks and investment firms. Because your group plan’s contract is technically an insurance contract, the funds it includes are segregated funds.

How Segregated Funds Work

Let’s break it down:

  • Segregated funds are market-based investments composed of other market-based investments.
  • When you invest in a fund, your money is pooled with other investors’ money to purchase the various investments within the fund.
  • A fund manager, usually an expert from a financial institution, selects and manages these investments according to the fund’s objectives.
  • Match a fund’s objective with your own goals by looking at the asset class in the fund’s name. For example, an equity fund aims for higher returns over time, while an income fund focuses on less growth with reduced risk.
  • Each segregated fund is unique. Even funds with similar objectives can have different investment mixes, affecting their performance.
  • Segregated funds are bought and sold once a day at their unit value, which is determined after the markets close at 4:00 P.M. Eastern Time.
  • Fees, commissions, and other costs can impact a segregated fund’s total return.
  • As with any market-based investment, returns are not guaranteed.

The Benefits of Segregated Funds

Some of the advantages of investing in segregated funds include:


Segregated funds often have lower minimum investment amounts and fees compared to direct investments, making them accessible to a broader range of investors, including those interested in higher-priced or exotic options.

Expert Management:

By investing in a segregated fund, you gain the expertise of a professional fund manager at a relatively low cost.

Built-in Diversification:

Investing in a segregated fund means your money is spread across many different investments, providing diversification, which is key to managing risk. With various fund managers and objectives, there’s likely a fund that aligns with your specific goals.

The Power of Pooling:

When you invest in a segregated fund, your money is combined with other investors’ funds, allowing you to:

  • Pay lower commission charges and transaction fees
  • Benefit from dollar-cost averaging by investing smaller amounts more regularly
  • Participate in more elite investments more significantly

Government Oversight:

Segregated funds are regulated by federal and provincial authorities, ensuring protection from unfair practices and supporting financial system stability.

Can you invest in more than one segregated fund?

While segregated funds are typically diversified by design, you can further diversify your investments by choosing a mix of segregated funds. Your choices should depend on the time you have to invest, your investment knowledge, and your risk tolerance.

Are segregated funds good when the markets are bad?

All market-based funds carry some degree of risk, and markets naturally fluctuate. Sometimes, higher-risk funds can take advantage of market volatility over the long term. However, your success largely depends on how much time, knowledge, and interest you have in investing, as well as your comfort level with risk.

Are Segregated Funds Right for You?

If you are ready for long-term investment, segregated funds can be an excellent choice. With the guidance of a trusted financial advisor, your assets will achieve steady, long-term growth.

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