Synthetic GICs emerge as another tool for stable portfolio

Synthetic guaranteed investment contracts (GIC) are a family of investments with characteristics that are similar to, but not necessarily the same as, those associated with traditional GICs, which are issued by life insurance companies. Synthetic GICs provide a number of features, including: 1. enha...

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Bibliographic Details
Published in:Pension management 1993-02, Vol.29 (2), p.34
Main Authors: Morrow, J Thomas, Chong-Wulff, Karen
Format: Magazinearticle
Language:English
Subjects:
Accounting
Advantages
Alternative
Asset allocation
Book value
Characteristics
Default
Defined benefit plans
Diversification
Due diligence
Executives
GICs
Guaranteed Investment Contracts
Insurance companies
Insurance industry
Interest rates
Investment advisors
Life insurance
Pension plan funding
Portfolio management
R&D
Research & development
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Summary:Synthetic guaranteed investment contracts (GIC) are a family of investments with characteristics that are similar to, but not necessarily the same as, those associated with traditional GICs, which are issued by life insurance companies. Synthetic GICs provide a number of features, including: 1. enhanced safety through diversification away from the domestic life insurance industry, 2. perfected security interest in, or out-right ownership of, the underlying assets by the contractholders, 3. enhanced yields, and 4. flexibility of contract features. The market's demand for synthetics was virtually assured by the continued rapid rise of the 401(k) market, with its appetite for safe, stable assets. Synthetic GICs are placed in 4 broad categories, including: 1. Other GICs (OGIC), 2. Life Insurance Company Separate Account GICs (SAGIC), 3. Financial Intermediary Synthetic GICs (FIGIC), and 4. Investment Manager Synthetic GICs (IMGIC).
ISSN:1078-9766