Segregated Funds  

A segregated investment fund (also called a Guaranteed Investment Fund or GIF) is commonly thought of as a mutual fund, which is only partially correct. A segregated fund is actually an insurance contract with two parts:

• a mutual fund that provides an opportunity for investment income and growth, and
• an insurance policy that covers certain aspects of potential capital losses.

The segregated investment fund is similar to a mutual fund because investors are pooling their money with other people to invest. As a result, life insurance companies distribute segregated funds with a guarantee attached to the investment that protects the investor’s principal from sudden market declines.

The main difference between segregated and mutual funds is in the ownership.  The investor has no ownership of the assets held by the investment fund. They do not receive shares or units of the fund, but rather their investment is evidenced in the form of an insurance contract.