Podcast
Questions and Answers
What is the outcome when the market value of a segregated fund is below the guaranteed amount at death?
What is the outcome when the market value of a segregated fund is below the guaranteed amount at death?
- The beneficiary receives the total amount invested.
- The beneficiary receives the guaranteed amount only. (correct)
- The beneficiary may receive a combination of both.
- The beneficiary receives the market value of the fund.
In the scenario where the market value of the segregated fund equals the guaranteed amount, what does the beneficiary receive?
In the scenario where the market value of the segregated fund equals the guaranteed amount, what does the beneficiary receive?
- Nothing, as the fund just breaks even.
- The guaranteed amount. (correct)
- The excess amount above the purchase price.
- The total investment amount.
What happens to the death benefit if the market value of the segregated fund exceeds the guaranteed amount?
What happens to the death benefit if the market value of the segregated fund exceeds the guaranteed amount?
- The beneficiary receives the market value of the fund. (correct)
- The beneficiary is limited to the guaranteed amount.
- The death benefit is canceled.
- The beneficiary gets both the market value and guaranteed amount.
How does creditor protection operate with segregated funds?
How does creditor protection operate with segregated funds?
What would Patricia receive if the market value of her segregated fund at Keith's death was $75,000?
What would Patricia receive if the market value of her segregated fund at Keith's death was $75,000?
What is the death benefit received by Antoine if the market value of Ayida’s segregated fund is $65,000 at her death?
What is the death benefit received by Antoine if the market value of Ayida’s segregated fund is $65,000 at her death?
How is the total death benefit calculated when the market value is less than the guaranteed amount?
How is the total death benefit calculated when the market value is less than the guaranteed amount?
What primarily distinguishes segregated funds from mutual funds?
What primarily distinguishes segregated funds from mutual funds?
Which of the following is a common feature shared by all managed products?
Which of the following is a common feature shared by all managed products?
What is one aspect of the investment structure of segregated funds?
What is one aspect of the investment structure of segregated funds?
Which of the following managed products is primarily oriented toward providing creditor protection?
Which of the following managed products is primarily oriented toward providing creditor protection?
Which feature is NOT typically associated with managed products like segregated funds?
Which feature is NOT typically associated with managed products like segregated funds?
What is one key characteristic of insurance proceeds in relation to bankruptcy?
What is one key characteristic of insurance proceeds in relation to bankruptcy?
Which of the following groups would most likely benefit from creditor protection?
Which of the following groups would most likely benefit from creditor protection?
What condition must be met for the assets in a segregated fund to be eligible for creditor protection?
What condition must be met for the assets in a segregated fund to be eligible for creditor protection?
What advantage do segregated funds offer in terms of estate planning?
What advantage do segregated funds offer in terms of estate planning?
What typically happens to the proceeds of a segregated fund upon the contract holder's death?
What typically happens to the proceeds of a segregated fund upon the contract holder's death?
What is one of the additional costs associated with segregated funds compared to mutual funds?
What is one of the additional costs associated with segregated funds compared to mutual funds?
Under federal bankruptcy law, which of the following statements is true about segregated funds?
Under federal bankruptcy law, which of the following statements is true about segregated funds?
What could cause the proceeds of a segregated fund to be subject to seizure under bankruptcy law?
What could cause the proceeds of a segregated fund to be subject to seizure under bankruptcy law?
What is a typical misconception regarding the appointment of beneficiaries in segregated funds?
What is a typical misconception regarding the appointment of beneficiaries in segregated funds?
What is a primary disadvantage associated with LSVCCs?
What is a primary disadvantage associated with LSVCCs?
How do closed-end funds initially raise capital?
How do closed-end funds initially raise capital?
What is a key characteristic of how closed-end fund prices are determined?
What is a key characteristic of how closed-end fund prices are determined?
Which statement about the management fees of closed-end funds is accurate?
Which statement about the management fees of closed-end funds is accurate?
What happens to closed-end fund units after they are issued?
What happens to closed-end fund units after they are issued?
How does market sentiment affect closed-end funds regarding their trading values?
How does market sentiment affect closed-end funds regarding their trading values?
What is typically true about the historical trading of closed-end funds?
What is typically true about the historical trading of closed-end funds?
What is one consequence of closed-end funds maintaining a large cash reserve?
What is one consequence of closed-end funds maintaining a large cash reserve?
When an investor sells shares of a closed-end fund, what fee is typically incurred?
When an investor sells shares of a closed-end fund, what fee is typically incurred?
Flashcards
Segregated Funds
Segregated Funds
A pooled investment that's structured as an insurance product. Insurance companies use investor funds to buy assets, then sell units to investors.
Insurance Product
Insurance Product
A financial product where the insurance company acts as the main intermediary/distributor.
Pooled Investment
Pooled Investment
A fund where money from several investors is combined to invest in a portfolio of assets.
Mutual Fund
Mutual Fund
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Investment Mandate
Investment Mandate
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Death Benefit Guarantee
Death Benefit Guarantee
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Market Value at Death
Market Value at Death
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Total Amount Paid to Beneficiary
Total Amount Paid to Beneficiary
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Segregated Fund Benefit When Market Value is Lower
Segregated Fund Benefit When Market Value is Lower
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Segregated Fund Benefit When Market Value is Higher
Segregated Fund Benefit When Market Value is Higher
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Segregated Fund Benefit When Market Value Equals Guaranteed Amount
Segregated Fund Benefit When Market Value Equals Guaranteed Amount
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Creditor Protection in Segregated Funds
Creditor Protection in Segregated Funds
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Creditor Protection
Creditor Protection
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Good Faith Purchase
Good Faith Purchase
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Beneficiary Designation
Beneficiary Designation
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Bypass Probate
Bypass Probate
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Probate
Probate
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Segregated Fund Costs
Segregated Fund Costs
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Bankruptcy Protection
Bankruptcy Protection
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Time Limit for Protection
Time Limit for Protection
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Bankruptcy Trustee
Bankruptcy Trustee
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LSVCC Redemption
LSVCC Redemption
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LSVCC Higher Costs
LSVCC Higher Costs
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Closed-end Fund
Closed-end Fund
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Closed-end Fund Trading
Closed-end Fund Trading
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Closed-end Fund Valuation
Closed-end Fund Valuation
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Closed-end Fund Discount
Closed-end Fund Discount
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Closed-end Fund Discount Significance
Closed-end Fund Discount Significance
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Closed-end Fund Management Fees
Closed-end Fund Management Fees
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Closed-end Fund Cash Reserve
Closed-end Fund Cash Reserve
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Study Notes
Other Managed Products
- Additional types of managed products, including their structure, characteristics, regulatory issues, and tax considerations, are covered in this chapter
- Key learning objectives include describing segregated funds, Labour-Sponsored Venture Capital Corporations, closed-end funds, and income trusts. There is also an analysis of investing in private equity.
Learning Objectives
- Describe the features and structure of segregated funds
- Discuss the advantages and disadvantages of Labour-Sponsored Venture Capital Corporations.
- Describe the features and structure of closed-end funds
- Differentiate among the types of income trusts
- Describe the advantages, disadvantages, and process for investing in private equity
Segregated Funds
- A type of pooled investment, similar to a mutual fund, but considered an insurance product
- Proceeds are used to purchase underlying assets, with units sold to investors
- Offer professional investment management, advice, and regular client statements
- Unique features for special client needs, such as maturity protection, death benefits, and creditor protection.
Labour-Sponsored Venture Capital Corporations (LSVCCs)
- Managed investment funds sponsored by labour organizations to provide capital for small to medium-sized and emerging companies
- Main attractions are federal and provincial tax credits (up to 17.5%)
- Considered a high-risk, speculative investment
Closed-End Funds
- Pooled investment funds that initially raise capital by selling a limited number of shares
- Shares trade on a stock exchange, with commissions paid on transactions
- Prices are based on market supply and demand, as well as underlying asset value, which can trade at discounts, par, or a premium relative to their NAV
- Can be used for specific investment strategies such as certain alternative strategies, less liquidity, and holding of assets
Income Trusts
- Similar to closed-end funds, investors purchase ownership interests in the trust
- Can be categorized as REITs (Real Estate Investment Trusts) or business trusts
- REITs purchase real estate and pass on rental income to investors; diversified holdings in real estate sectors
- Business trusts purchase assets of underlying companies, usually in manufacturing, retail, or service industries.
Private Equity
- Financing for companies unwilling or unable to find capital in the public markets (stocks and bonds)
- Includes private debt and equity investments
- Generally offers high returns, but with higher risks compared to other investment types, such as public equity and bonds.
- Private equity has specific investment vehicles including leveraged buyouts, growth capital, turnaround situations, early-stage venture capital, late-stage venture capital, and distressed debt.
- Listed private equity firms trade on stock exchanges, offering diversified investments in various companies.
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