Managed Money Reporter Newsletter — Issue 122, March 1997


Editors: Carl Spiess & Allan McGlade



Growth Funds With The Principal Guaranteed!

Special report by Allan McGlade

Seg Funds Coming Out Party

Segregated funds have been around for several years yet they have mostly gone unnoticed by the investing public. That is about to change however. The recent launch by ManuLife of their Guaranteed Investment Fund products which will be managed by several of the big name fund companies is sure to raise the level of awareness for the insurance industry's answer to mutual funds.

Features of Segregated Funds

Seg funds as they are often called offer some unique features that set them apart from other investment funds. The most important is a guarantee to return at least 75% of your capital at maturity or death, most seg funds have bumped the guarantee at maturity to 100%. The maturity date is typically ten years from the time of purchasing the units. This is a feature that risk adverse individuals should find attractive, especially seniors who are searching for alternatives to interest bearing vehicles. Some seg funds will allow you to lock in your gains before the maturity date which is a valuable feature when you consider the ten year time horizon. If the fund has a significant increase in value in a given year you don't have to worry about giving it back if the market declines, the new maturity date would be ten years from the time of locking in the gains.

Because these funds are issued by insurance companies, they fall under the rules governing insurance products which are protected from the claims of creditors. If you are a professional or in business for yourself this protection could be of great importance. It should be noted that the courts will not uphold the protection if the assets are transferred in anticipation of an event such as bankruptcy. The last feature is the ability to bypass probate. Like an insurance policy if you have named a beneficiary the proceeds will be paid directly to them. This applies for registered and non-registered contracts.

What About Performance

Just like mutual funds, seg funds offer the full spectrum of asset classes. The riskier the fund the greater the potential return on your capital but with little downside risk because of the guaranteed component. In the past the annual returns have underperformed when compared to mutuals. There is a trade off for the guarantees provided and that is in the area of returns. It is worth mentioning however that 96 of 242 seg funds performed in the top half of all funds in their respective categories in 1996.

The funds that ManuLife recently introduced will provide the benefits of a seg fund while getting the management of successful fund companies such as Trimark, AGF, Elliot & Page, Fidelity and GT Global. Investors can even switch between fund companies. We think this is a winning combination that is worth consideration when reviewing the current allocation of your assets. If you liked the idea of index linked GICs, seg funds will also be attractive as you also have upside potential without capping your gain.

Which Segregated Fund To Buy?

Like mutual funds it pays to do your homework before making a purchase. Allan McGlade has been assigned the task of keeping abreast on the seg fund marketplace. You can contact Allan at 862-3066 or e-mail him for more information or a recommendation.

BEST PERFORMING SEG FUNDS
One Year %Return Three Years %Return Five Years %Return
1) Colonia Special Growth Fund 72.0 1) Colonia Life Special Growth 26.7 1) Canada Life US & Intl Eqty S-34 16.2
2) MetLife MVP Growth Fund 33.3 2) NN CAN_AM Fund 17.8 2) Equitable Life Seg Common Stck 15.5
3) GWL Canadian Resources (AGF) B 32.7 3) Equitable Life Seg Common Stck 16.8 3) Empire Equity Growth Fund 3 15.2
4) CDA Aggressive Eqty (Altimira) 32.3 4) Standard Life Ideal Equity Fnd 14.9 4) Industrial Alliance Stocks Fnd 14.7
5) GWL Canadian Resources (AGF) A 32.3 5) MetLife MVP US Equity Fund 14.7 5) Empire Premier Equity Fund 1 14.2
6) Maritime Life Cdn Equity 31.5 6) NAL-Investor US Equity Fund 14.7 6) Maritime Life Canadian Eqty G 14.1
7) Equitable Life Seg Common Stock 30.5 7) NAL-Investor Equity Fund 14.2 7) Imperial Growth N American Eqt 13.8
8) Maritime Life Cdn Eqty F 30.5 8) London Life US Equity 14.0 8) National Life Equities Fund 13 .7
9) Canada Life European Eqty S-37 30.1 9)Imperial Growth N American Eqt 14.0 9) Standard Life Ideal Equity Fnd 13.6
10) GWL Growth Equity Fund (AGF) B 29.7 10) Maritime Life Canadian Eqty G 13.7 10) London Life Canadian Equity 13.5

source: Bell Charts, 01/31/97

Investor Notes

BPI Canadian Smaller Companies Fund Capped!

BPI has joined a number of other companies closing their successful small capitalization stock funds to new investors. Existing investors will still be able to purchase more units of the fund in the future.

Retirement & Estate Planning Seminar

This seminar will be of interest to those who are presently retired or are nearing retirement. Seating is limited. Please call at 862-3066 to confirm your attendance. Lunch will be served.

Date: April 15
Time: 12 P.M.
Place: ScotiaMcLeod
40 King St W, 63rd floor

 



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F.  416.863.7479
E. carl.spiess@scotiawealth.com
    allan.mcglade@scotiawealth.com

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