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The segregated funds, continuing on their momentum

by

Alain Thériault

19 June 2017 07:00

Benjamin Reed-Hurwitz

According to Strategic Insight, the segregated funds, continuing on a roll that goes back at least ten years, despite significant disbursements of an aging population. A RRSP season 2017 exceptional helped.

During an exclusive interview granted to the Journal of insurance, the senior analyst and responsible of the wealth management products of the insurance industry at Strategic Insight, Benjamin Reed-Hurwitz, revealed that the segregated funds have been a starting gun in 2017, thanks to a RRSP season exceptional. «The RRSP season has been fairly strong in comparison to that of 2016 to segregated funds «, he observed.

It was also strong for the mutual funds. «The jump was even larger than for the segregated fund in terms of gross sales, which explains that some have interpreted as the segregated funds have been a less good first quarter in 2016. «

Brake to net sales

For their part, the withdrawals have acted as a brake on net sales, » adds the analyst. Net sales are the difference between gross sales and the cash outflows that occur during the observed period. Mr. Reed-Hurwitz explains that the gross sales indicate future sales (of a manufacturer), its ability to continue to grow the asset and meet the demand of the market. Net sales indicate the impact of redemptions (outflows) on the gross sales.

«The outflows are high enough in the area of segregated funds. They remain a brake on their sales «, he added. The analyst adds that this is, in part, the effect of older clients who withdrew the money out of the fund to guarantee minimum withdrawals (GRM) for the retirement or withdrawals occur by reason of an event of succession, such as, the death.

However, these negative factors are mitigated by the attractiveness of the segregated fund on that same customer, for reasons of financial security. «On the other hand, the segregated funds attract this older clients because they offer safeguards that protect against the high volatility of the financial markets,» says Mr. Reed-Hurwitz.

Thus, this population is widely targeted by the segregated fund should she give a blow to the sales of segregated funds. «The guarantees have been an important feature in 2016, when we look back on events such as the Brexit, or the us elections,» commented the analyst.

Ten years of growth

The gross sales of segregated funds, have also declined somewhat, between 2016 and 2015, according to data from Strategic Insight. They have reached 12,41 billion dollars (G$) in 2016, compared to 12,95 G$ in 2015, a decrease of 4.2 %.

This decrease is nothing that is not out of the ordinary, however, specifies Mr. Reed-Hurwitz, since the level of gross sales in 2016 is similar to that achieved in the past ten years. «Our study, which shines a light on the gross sales of the last ten years, also reveals that these sales remained in the range of$ 12b to$ 13 billion since 2007, a fairly consistent,» revealed the analyst responsible for the study.

Except in 2013, he added. This is the year during which the downward revision of the guarantees of withdrawals, and the closing products to new deposits and the restrictions on the existing deposits has led to a more marked decrease in gross sales.

After 2013, segregated fund products and the launch of new products have helped to re-process the sales, was recalled by Mr. Reed-Hurwitz. «There has been a lot of development of products. New GRM appeared, as well as products that are available in the categories investment, income and wealth. This has led a lot of flexibility. «

With these developments and the adjustment of the segregated fund guarantees traditional, Mr. Reed-Hurwitz finds that the segregated funds continue to attract a wider audience. The suppliers have enabled it to meet a wide range of needs by breaking down their offer around the guarantees of 75 % at death and at maturity 100 % at death and 75 % at maturity, and guarantees 100 % death and maturity.

«In addition, many companies are ensured to have a full alignment on their shelves, both for advisers and for their clients’ needs. I’m not saying that all the players have done, but this has been a priority for them to ensure that there is no lack in their range of products, » said the senior analyst in segregated funds.

Trends

The assets of the segregated fund will probably be increased at the end of the current year. Mr. Reed-Hurwitz not ventured, however, not to predict what will be made the coming quarters of 2017. The total assets of the segregated funds is increased to 115 G$ in 2016, an increase of 5 % compared to 2015.

For the time being, the lion’s share of the money to the segregated fund in terms of gross sales is allocated to balanced fund. The action fund come second, far behind. Investors allocate their balls. «The new entries of money from the segregated funds are more diversified than ever,» said Mr. Reed-Hurwitz. According to him, the markets in the u.s., Europe, Australasia and Far East attract the largest share of entries, which includes not only the actions, but also the obligations of the foreign markets.

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