Segregated funds typically offer a menu of segregated fund options, each mirroring a particular investment mandate: equity, balanced, bond, money market, and so on. The contract owner allocates deposits among the available options. The insurer maintains units of account to track each owner's share; the unit value fluctuates daily with the net asset value of the underlying portfolio.
This variable unit structure means the insurer bears investment risk on the guarantee: if markets fall below the guarantee threshold, the insurer must top up the payout from its own capital. The premium or management expense ratio (MER) for segregated funds is therefore typically higher than for comparable mutual funds, reflecting the cost of the insurance guarantee.