LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
A client asks what distinguishes a growth equity segregated fund from a value equity segregated fund. The agent should explain that:
- Agrowth funds are guaranteed by the insurer while value funds carry no guarantee at all
- Bgrowth funds distribute income every month while value funds accumulate it inside the fund
- Cgrowth funds hold only foreign shares and value funds hold only Canadian shares
- growth funds seek companies expanding quickly; value funds seek shares priced below worth
Correct answer: D) growth funds seek companies expanding quickly; value funds seek shares priced below worth
Growth managers pay for expected expansion in earnings and often accept higher valuations. Value managers look for companies trading below what the manager considers fair, often with steadier businesses. The two styles lead in different market conditions.
Why the other options are wrong
- AGuarantees come from the contract, not from the investment style the manager follows.
- BDistribution frequency is a fund feature and is not determined by the manager's style.
- CBoth styles can be applied to domestic shares, foreign shares or a mixture of them.
Exam tip
Style describes how the manager picks shares, not where they are listed or how they pay.
Common mistake
Treating growth and value as risk categories rather than as selection approaches.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.