Study guide
12.3 Segregated Funds, Labour-Sponsored Funds & Listed Private Equity
Canadian Securities Course CSC
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1 Introduction & Exam Overview
About the CSC Exams
2 Chapter 1: The Canadian Investment Marketplace
1.1 The Canadian Securities Industry & the Investment Dealer's Role 1.2 Financial Intermediaries: Banks, Trusts, Credit Unions, Insurers & Pension Funds 1.3 Financial Market Trends 1.4 Investment Capital, Financial Instruments & Financial Markets 1.5 Canadian Exchanges, ATSs, Dark Pools & the Order Protection Rule 1.6 Canadian Securities Regulators, the CSA & CIRO 1.7 Investor Protection: OSFI, CIPF and CDIC 1.8 Ethics, Standards of Conduct & the Client Focused Reforms 1.9 Conflicts of Interest, Complaint Handling & Remediation
3 Chapter 2: The Economy
2.1 Economics Foundations & Measuring Economic Growth 2.2 The Business Cycle & Economic Indicators 2.3 Inflation & Interest Rates 2.4 The Labour Market & Unemployment 2.5 The Bank of Canada & the Inflation-Control Target 2.6 Implementing Monetary Policy: The Operating Band, Market Operations & Transmission 2.7 Fiscal Policy, Deficits & the Challenges of Government Policy 2.8 International Finance & Trade: The Balance of Payments and the Canadian Dollar
4 Chapter 3: Features and Types of Fixed-Income Securities
3.1 The Fixed-Income Marketplace, Bond Terminology & Security 3.2 Protective Covenants, Retirement Provisions & Extendible/Retractable Features 3.3 Government of Canada Securities: T-Bills, Marketable Bonds & RRBs 3.4 Provincial & Municipal Debt and Strip Bonds 3.5 Corporate Bonds, Credit Spreads & Bond Ratings 3.6 Money Market Instruments, Floating-Rate Notes & International Bonds 3.7 Other Fixed-Income Securities & Reading Bond Quotes
5 Chapter 4: Pricing and Trading of Fixed-Income Securities
4.1 Bond Pricing, Price–Yield Relationships & Accrued Interest 4.2 Yield Calculations & Return Measures 4.3 The Term Structure of Interest Rates & Yield Curve Theories 4.4 Fundamental Bond Pricing Properties: Volatility Rules, Duration & Convexity 4.5 Bond Market Trading & Bond Indexes
6 Chapter 5: Common and Preferred Shares
5.1 Common Shares: Ownership Rights, Voting & Restricted Shares 5.2 Dividends, DRIPs, Stock Splits & Consolidations 5.3 Preferred Shares: Features, Cumulative Dividends & Taxation 5.4 Preferred Share Variations: Convertible, Callable, Retractable, Floating & Rate-Reset 5.5 Fundamental Equity Metrics & Ratios 5.6 Stock Indexes & Averages
7 Chapter 6: Equity Transactions
6.1 Order Types, Execution & Market Mechanics 6.2 Margin Trading: Long Accounts & Borrowing 6.3 Short Selling & Short-Margin Requirements 6.4 Trading & Settlement Procedures: T+1, CDS & Confirmations
8 Chapter 7: Derivatives
7.1 Derivatives: Role, Underlying Assets & Users 7.2 Options Fundamentals: Calls, Puts & Moneyness 7.3 Option Strategies & Risk Management 7.4 Forward & Futures Contracts 7.5 Rights & Warrants
9 Chapter 8: Corporations and their Financial Statements
8.1 Corporate Structures & Corporate Governance 8.2 The Annual Report, Accounting Standards & the Auditor's Report 8.3 The Balance Sheet & Income Statement 8.4 The Cash Flow Statement & Earnings Quality 8.5 Public Company Disclosure, Investor Rights, Take-Over Bids & Insider Trading
10 Chapter 9: Financing and Listing Securities
9.1 Government & Corporate Financing: Underwriting and Syndicates 9.2 The Prospectus Process, Stabilization & Purchaser Rights 9.3 The Exempt Market & Private Placements 9.4 The Listing Process: TSX, TSXV & Capital Pool Companies 9.5 Continuous Disclosure, Material Changes & Insider Reporting
11 Chapter 10: Investment Analysis
10.1 Methods of Equity Analysis & Macroeconomic Analysis 10.2 Fundamental Industry Analysis 10.3 Company Analysis: Competitive Advantages, Governance & the Dividend Discount Model 10.4 Discounted Cash Flow & Relative Valuation Multiples 10.5 Financial Statement Ratio Analysis 10.6 Assessing Preferred Share Investment Quality 10.7 Technical Analysis: Charts, Trends & Patterns 10.8 Technical Indicators, Volume, Breadth & Sentiment
12 Chapter 11: Portfolio Analysis
11.1 Measuring Investment Return 11.2 Measuring Risk: Types of Risk, Standard Deviation & Downside Measures 11.3 Portfolio Risk & Return: Correlation and Diversification 11.4 Beta, the Capital Asset Pricing Model & the Security Market Line 11.5 Portfolio Manager Styles: Equity & Fixed Income 11.6 The Portfolio Management Process: Objectives, Constraints & the IPS 11.7 Asset Mix, Monitoring, Performance Evaluation & Rebalancing
13 Chapter 12: Alternative Investments, Other Managed, and Structured Products
12.1 Alternative Investments: Structures, Fees & Liquid Alternatives 12.2 Alternative Strategies, Performance Measurement & Due Diligence 12.3 Segregated Funds, Labour-Sponsored Funds & Listed Private Equity 12.4 Income Trusts, REITs & Closed-End Funds 12.5 Structured Products: PPNs & Market-Linked GICs 12.6 Split Shares & Asset-Backed Securities
14 Chapter 13: Mutual Funds
13.1 Managed Products & Mutual Fund Structure 13.2 Pricing Mutual Fund Units: NAVPS & Forward Pricing 13.3 Mutual Fund Fees, Sales Charges & Unit Series 13.4 Mutual Fund Regulation, Fund Facts & Account Opening 13.5 Types of Mutual Funds & Fund Management Styles 13.6 Redemptions, Withdrawal Plans & Measuring Fund Performance
15 Chapter 14: Exchange-Traded Funds (ETFs)
14.1 ETF Origins, Structure, Tax Efficiency & ETF Facts 14.2 ETF Creation, Redemption & Arbitrage 14.3 Types of ETFs & Advanced Strategies 14.4 Comparing ETFs, Mutual Funds & Individual Securities
16 Chapter 15: Working with the Institutional Client
15.1 The Institutional Marketplace & Institutional Clients 15.2 Institutional Investment Guidelines, Styles & Restrictions 15.3 Buy Side & Sell Side: Trading Desks, Revenue, Clearing & Best Execution 15.4 Block Trading, Dark Pools & Algorithmic Trading
17 Chapter 16: Fee-Based Accounts and Working with the Retail Client
16.1 Fee-Based Accounts: Managed & Non-Managed Models 16.2 Fee Transparency, CRM2 & Total Cost Reporting, and MWRR vs. TWRR 16.3 The Financial Planning Approach & the Life Cycle 16.4 Behavioral Finance, Sequence-of-Returns Risk & Client Coaching 16.5 Estate Planning Basics
18 Chapter 17: Canadian Taxation
17.1 The Canadian Taxation System 17.2 Taxation of Investment Income 17.3 Capital Gains, Losses & The Superficial Loss Rule 17.4 Registered vs Non-Registered Tax-Advantaged Accounts 17.5 Tax Planning Strategies, Pension Plans & the RDSP
12.3 Segregated Funds, Labour-Sponsored Funds & Listed Private Equity
Key Takeaways Explain This Topic AI
Segregated funds are individual variable insurance contracts from life insurers, with maturity and death benefit guarantees of 75% to 100% of deposits.
Naming a beneficiary lets seg fund proceeds bypass the estate and probate, and a family-class beneficiary can provide creditor protection.
If an insurer fails, Assuris protects seg fund guarantees so the policyholder keeps up to $100,000 or 90% of the benefit, whichever is higher.
Labour-sponsored venture capital corporations invest in small businesses; a federal 15% tax credit applies to provincially registered funds on up to $5,000 a year (maximum $750).
Listed private equity gives exchange-traded access to private companies but can trade at discounts or premiums to net asset value.
Last updated: October 2026
Beyond mutual funds and ETFs, Canadian investors can choose managed products with insurance features, tax incentives or access to private markets. Each has advantages and trade-offs that affect suitability.
Segregated Funds
A segregated fund is an individual variable insurance contract (IVIC) issued by a life insurance company. The contract invests in one or more underlying funds that resemble mutual funds, but the assets are held separately (segregated) from the insurer's general assets, and the contract adds insurance guarantees.
The Parties
Contract holder: owns the contract and makes the investment decisions.
Annuitant: the person whose life the guarantees are based on (often the same as the holder).
Beneficiary: receives the death benefit.
Insurer: issues the contract and provides the guarantees.
The Guarantees
Guarantee What it promises
Maturity guarantee At the maturity date (usually at least 10 years after deposit), the holder receives at least 75% to 100% of deposits (less withdrawals), even if the market value is lower
Death benefit guarantee If the annuitant dies, the beneficiary receives at least 75% to 100% of deposits (less withdrawals)
Reset Some contracts let the holder lock in market gains, raising the guaranteed amount (often restarting the 10-year term)
Other Features
Estate planning: with a named beneficiary, the death benefit is paid directly, bypassing the estate, probate fees and delays.
Creditor protection: a contract with a beneficiary in the family class (spouse, child, grandchild or parent), or an irrevocable beneficiary, may be protected from the holder's creditors, which appeals to business owners and professionals.
Protection if the insurer fails: Assuris , the industry's protection organization, guarantees that the policyholder will retain up to $100,000 or 90% of the segregated fund guarantee, whichever is higher.
Costs: seg funds charge higher fees than comparable mutual funds because the insurer charges for the guarantees.
Regulation: seg funds are insurance products, sold by licensed life insurance agents and regulated by provincial insurance regulators, with industry standards in the CLHIA's Guideline G2. They are not securities regulated under NI 81-102.
Taxation
In a non-registered contract, the fund allocates its income and capital gains to the contract holder each year. Unlike a mutual fund trust, a seg fund can also allocate capital losses to holders. A guarantee top-up paid at maturity or death is generally treated as a capital gain, and withdrawals or redemptions trigger gains or losses.
Worked Example: How the Guarantees Work
Lena deposits $100,000 in a segregated fund contract with a 75% maturity guarantee and a 100% death benefit guarantee. Ten years later, after a market downturn, the contract is worth $70,000.
At maturity: she receives the higher of the market value ($70,000) and the guarantee ( 100,000 × 75 % = 75,000 100{,}000 \times 75\% = 75{,}000 100 , 000 × 75% = 75 , 000 ), so the insurer tops up $5,000.
If she had died instead: her beneficiary would receive the higher of $70,000 and the 100% guarantee of $100,000, a top-up of $30,000.
With a reset: if the contract had grown to $130,000 in year 4 and she had reset it, her guarantees would be based on $130,000, usually with a new 10-year maturity date.
The guarantees matter most when markets fall near the maturity date or the annuitant's death. In a rising market, the holder pays the higher fees for protection that is never used.
Segregated Funds vs. Mutual Funds
- Feature Segregated fund Mutual fund
- Legal form Insurance contract Trust or corporation (a security)
- Guarantees Maturity and death benefit, 75% to 100% None
Probate bypass Yes, with a named beneficiary Only in a registered plan with a beneficiary designation, where provincial law allows
Creditor protection Possible with a family-class or irrevocable beneficiary Generally none outside certain registered plans
- Protection if the firm fails Assuris CIPF, for accounts at member dealers
- Costs Higher Lower
- Labour-Sponsored Venture Capital Corporations (LSVCCs)
An LSVCC is a fund sponsored by a labour organization that invests in small and medium-sized businesses, often in its home province. Governments encourage these investments with tax credits:
A federal tax credit of 15% applies to shares of provincially registered LSVCCs on up to $5,000 of purchases a year, a maximum credit of $750. There is no federal credit for federally registered LSVCCs.
Some provinces add their own credits, and the shares can be held in an RRSP.
Shares must usually be held for a minimum period (often eight years), or the credits must be repaid.
Risks: LSVCCs are concentrated in small private companies, can be hard to value, are illiquid during the holding period, and often charge high fees. They suit investors who can lock up money for years and want the tax credits, and they should be only a small part of a portfolio.
Listed Private Equity
Listed private equity companies and funds are traded on a stock exchange but invest in private companies through buyouts, venture capital and growth investments. They give ordinary investors access to private equity with daily liquidity, without the high minimums and long lock-ups of private funds. Their shares can trade at a discount or premium to the estimated value of their holdings, results depend heavily on the manager, and private holdings are valued infrequently.