What Does Segregated Fund Mean?

The term refers to a group investment similar to the well-known mutual funds. However, unlike the latter, segregated funds are treated as insurance products.

Segregated funds make use of receipts and large sums of money coming from investors. These incomes are transformed by insurance companies who operate with such funds into special investments. The most common is that an insurance company buys underlying assets. Moreover, shares of these funds are vendible to further investors.

Segregated Fund Explained

Segregated funds usually secure a certain amount of return during the investment’s life or at the fund’s maturity date. However, this warranty usually means some additional fees to the investor. This group of fees is known as opportunity cost.

Nevertheless, investors who invest into segregated funds must be careful as besides the guarantee some large fees may apply in case they sell fund-shares prior to the funds’ maturity date.