LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
A client with no interest in managing several funds is shown a portfolio segregated fund. Such a 'fund of funds':
- AHas no diversification, since all of its money is invested in the insurer's flagship fund and nothing else
- BIs a money market fund that holds units of other money market funds
- Invests in other funds to deliver a target asset mix and risk level, often rebalanced automatically
- DInvests in a single company through several different fund structures
Correct answer: C) Invests in other funds to deliver a target asset mix and risk level, often rebalanced automatically
Portfolio funds simplify diversification for clients who want one decision. They may carry layered fees.
Why the other options are wrong
- AIt is highly diversified across underlying funds.
- BIt may hold money market funds among others, but it is not one.
- DA fund of funds holds many underlying funds, not a single company.
Exam tip
Portfolio fund: one-stop asset mix with rebalancing.
Common mistake
Adding a portfolio fund on top of a self-built mix, duplicating exposures.
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.