Also, worryingly, earlier in the year, fixed income dropped in lockstep with stocks. Negative correlation is re-emerging, in a glimmer of hope, but given the aggressive policy it appears that, generally, what’s bad for bonds is going to be bad for stocks. The backdrop to all this uncertainty, of course, is the geopolitical strife that’s exacerbated supply chain issues. Russia’s invasion of Ukraine, for example, has pushed energy prices up, fuelling inflation and contributing to a cost-of-living crisis in many countries.
There are few places, therefore, to hide for investors, meaning many have stepped into alternative investments – an area many are less familiar with, and which are often illiquid. Where can clients find some certainty in an uncertain world? This is where segregated funds come in. Similar to a mutual fund in that it’s a pooling of investments, a segregated fund policy includes insurance guarantees that can protect much or even all of your original investment.
WP spoke to John Yanchus, Director of Tax and Estate planning at Canada Life, to understand the benefits of this solution, especially given the market volatility.
Why are segregated funds the solution?
Given the prospect of more interest rate hikes, security of income has been propelled up investors’ list. This typically leads to more willingness to discuss solutions like seg funds. And given the current environment and volatility, the guarantees play a positive role in protecting capital and giving people that peace of mind. When interest rates are going up and the markets are still a little leery, seg funds allow people to know they’ve got that protection.
