LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
A 'real estate' or 'infrastructure' segregated fund:
- ACannot lose value, since property prices only rise over the long term and rents are contractual
- Invests in property or infrastructure for diversification and income, with valuation and liquidity risks
- CIs a bond fund that lends to property developers and infrastructure builders
- DIs as liquid as a money market fund, since the underlying properties can be sold on any business day at the appraised value
Correct answer: B) Invests in property or infrastructure for diversification and income, with valuation and liquidity risks
Alternative asset funds add diversification but may restrict redemptions in stress. Disclosure matters.
Why the other options are wrong
- AReal estate and infrastructure values fluctuate and can fall.
- CReal asset funds hold assets, not developer loans.
- DLiquidity can be limited and redemptions may be capped.
Exam tip
Real assets: diversification, income, liquidity risk.
Common mistake
Ignoring redemption limits on a real estate fund.
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.