What is the purpose of a segregated fund in investment management?

A segregated fund serves a unique role in investment management by combining the potential for investment returns with the features of insurance protection. This combination is advantageous for investors seeking growth potential through market investments while also wanting a degree of security that comes from an insurance policy.

The primary highlight of a segregated fund is that it offers a guaranteed return of capital upon maturity or death, depending on the specific features of the fund. This guarantees some portion of the investor’s initial capital, providing a safety net that is not typically available with standard mutual funds. Additionally, segregated funds often come with benefits such as creditor protection, allowing policy owners to protect their investment from creditor claims.

While the other options may contain elements relevant to investment management, they don’t capture the primary dual function of segregated funds. The fund is not simply a long-term savings account or focused solely on providing guaranteed interest rates, nor does it exclusively center around mutual fund investments. By focusing on the combination of investment performance with an element of insurance, segregated funds meet the needs of investors who balance risk with the desire for protection.