Guaranteed investment contract

Synthetic guaranteed investment contracts (GICs) provide greater safety than traditional GICs, mainly because they allow greater diversification and tend to provide higher returns. Not surprisingly, synthetic GICs have become very popular with pension funds, many of which have increased their investment in synthetic GICs because of the higher volatility associated with standard GICs. Pension fund managers, however, need to exercise caution when selecting synthetic GICs since not all carry the same risks. One good way for managers to avoid incurring losses from the selection of high-risk synthetic GICs would be to familiarize themselves with the product variations of the wrapper portions of synthetic GICs. Issues that they must consider when evaluating wrappers include the legal issues involved in the title retention of assets; the contract terms that come with the wrappers; and the regulatory clauses that govern their use.

Business
Banking, finance and accounting industries
Investments
Pension funds
Evaluation
Guaranteed investment contracts