What are segregated funds in your group retirement plan?

Segregated funds are one of the most common investment options for group savings and retirement plans. They can offer more elite and exotic investment options, out-of-the-box diversification, the built-in expertise of a fund manager, and a bit of reassurance that regulators are keeping an eye on everything. But what are segregated funds exactly? And how can they work for you and your savings?

Segregated funds, sometimes called market-based funds, are single investments made up of a variety of other investments (sometimes hundreds of them). Each fund’s mix of investments is usually designed and managed by investment experts focused on a specific objective—like taking a chance on higher returns or embracing more stable growth with less risk.

Segregated funds vs. mutual funds

You may have heard of mutual funds. The segregated funds available in your group retirement plan work very much like mutual funds. The key difference to understand is that segregated funds are offered by insurance companies, while mutual funds are offered by banks and investment companies. Because your group plan’s contract is technically an insurance contract, the funds it offers are technically segregated funds.

How segregated funds work

Let’s break this down a bit:

  • Segregated funds are market-based investments made up of other market-based investments. 
  • When you put money in a fund, your money is pooled with other investors’ money to buy into all the different investments that are in the fund. 
  • A fund manager—often a financial institution staffed with investment experts—chooses the different investments and, for actively managed funds, manages them over time based on the fund’s objective. 
  • Try matching a fund’s objective with your own by looking for the asset class in the name of the fund. An equity fund is likely focused on bigger returns over time, while an income fund might be pairing less growth with less overall risk.
  • No two segregated funds are alike. Even funds with the same objective can have very different investment mixes, which can affect how they’ll perform at any given time. 
  • Segregated funds are bought and sold once a day—for their value per unit, usually called their unit value—after the markets close at 4:00 P.M., Eastern time. 
  • A segregated fund’s total return can be affected by fees, commissions, and other costs.
  • As with any market-based investment, returns aren’t guaranteed. 

The benefits of segregated funds

Some of the best things about investing in a segregated fund are:


Segregated funds usually have smaller minimum investment amounts and lower fees than direct investments, giving all investors access to more highly priced or exotic investment options. 

Expert management

Investing in a segregated fund allows you to benefit from the professional expertise of a full-time fund manager at a relatively low cost. 

Built-in diversification

When you put your money in a segregated fund, you buy into more investments than you could on your own. Having your money in a wide variety of investments is called diversification. And it’s key to managing risk. Not to mention, with so many different fund managers focused on so many different fund objectives, no matter what your goal might be, there’s a fund to help you reach it. 

The power of pooling

When you invest in a segregated fund, your money is pooled with money from other investors. Together, you’re buying and selling more investments with more money than you could on your own, allowing you to:

  • Pay less in commission charges and transaction fees
  • Benefit from dollar-cost averaging by investing smaller amounts more regularly
  • Participate in more elite investments in a more significant way 

Government oversight

Segregated funds are subject to federal and provincial regulation—rules made and enforced by government agencies to protect you from unfair, improper, and fraudulent practices and to support the stability of our financial systems.

The benefits of your group retirement plan’s segregated funds

You can invest in segregated funds as an individual investor, either directly or through an RRSP or TFSA. But you can probably invest in segregated funds through your group retirement plans as well. Your group plan’s funds offer all the same benefits as individual funds do, plus all the benefits of investing in your group plan.

Can you invest in more than one segregated fund?

The investments that make up a segregated fund are usually diversified by design. But you can diversify even further by choosing a mix of segregated funds based on the time you have to invest, your knowledge of investing, and the amount of risk you’re willing to take.

Are segregated funds good when the markets are bad?

All market-based funds involve some degree of risk. Markets go through cycles—sometimes you make more than you expect, sometimes less. Sometimes, investing in riskier funds over the long term can help you make the most of market volatility. But like all investing, it largely depends on how much time, knowledge, and interest you have, and how comfortable you are with risk.

Are segregated funds right for you?

If you’re a member of a group retirement plan, sign in to your account to find out which funds you can invest in. 

  • If you feel overwhelmed by your choices, check out your plan’s ready-made segregated fund options—like target-date funds or asset allocation options
  • If you’re comfortable doing it yourself, go for it! Just be sure to check in on your choices from time to time to confirm they’re still in line with your goals.

And of course, no matter how you choose to invest in segregated funds, talk to a financial expert you trust—always a good idea when it comes to saving for the future you dream of.

The commentary in this publication is for general information only and should not be considered legal, financial, or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.