Segregated funds and mutual funds: what are the differences?

I frequently get asked about the difference between segregated funds and mutual funds.  In fact, some people have never heard of segregated funds.  One reason for that may be that there are significantly more mutual funds available in Canada than segregated funds.  They may also have a branding problem; they are known as segregated funds, segs, guaranteed investment funds, and GIFs.  GIFs seem to be the new standard, and that is what I will call them.

So, what are GIFs?  Simply stated, they are mutual funds provided by an insurance company.  This may not seem important, but it gives GIFs significant features that mutual funds do not have because they are insurance contracts.  The benefits include:

  • Maturity guarantee
  • Death benefit guarantee
  • Ability to name a beneficiary on registered AND non-registered investments
  • Ability to bypass the estate (if a beneficiary is named)
  • Possible creditor protection (under certain circumstances)


This short video illustrates the difference in under 2 minutes:

The original video can be found here: Seg funds or mutual funds

The downside to GIFs is that the benefits are not free.  You, as the investor, pay for them through higher fees than mutual funds.  That being said, GIFs can potentially save an estate a lot of money in probate and legal fees as they do not form part of the estate.  There is also a privacy benefit: the funds go directly to the beneficiary, bypassing the estate, which is in the public domain.  This means that your nosey sibling need never know where your money went.

GIFs can make a lot of sense for many people and their families.  If you want more information, I am always happy to discuss them with you and see if they make sense for you.

Enjoy your summer!