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hellmaster
05-01-2008, 12:29 AM
Hi, guys,

Can anyone please help me understand the difference between"separate account" and "individual account" the case study referred to under the "Separate Account Institutional GIC" part?

The case study seems to indicate that separate accounts are for institutional investors with at least 25 million net worth. Then when they are calculating the credited rate, they have a term like "(MV separate account - BV individual accounts)". So does it mean individual accounts are from the separate account? But they also mentioned earlier that "institutional client owns the market value of its share in the separate account...." which seems to suggest separate account is just account for institutional investor...

I am so confused...please help!

Thanks a lot in advance!

The Smokin' Cracktuary
05-01-2008, 12:14 PM
Hi, guys,

Can anyone please help me understand the difference between"separate account" and "individual account" the case study referred to under the "Separate Account Institutional GIC" part?

The case study seems to indicate that separate accounts are for institutional investors with at least 25 million net worth. Then when they are calculating the credited rate, they have a term like "(MV separate account - BV individual accounts)". So does it mean individual accounts are from the separate account? But they also mentioned earlier that "institutional client owns the market value of its share in the separate account...." which seems to suggest separate account is just account for institutional investor...

I am so confused...please help!


Thanks a lot in advance!


Ok, that's easy. I have no idea.

I am not saying that I know everything there is to know, and I haven't even read the case study yet, but for what it's worth, I don't remember reading about anything dealing with that terminology. So I doubt there will be any questions requiring it's knowledge. To the extent that you need to know to understand other concepts, well, I will be in as poor shape as you.

In general, however, I don't think that who or what the investors are has anything to do with assets being considered separate account assets, except maybe from a pure terminology/jargon standpoint. Separate account assets are what they are regardless of the investor.

I also know that in the UK (or is it Canada? or Both?) they call them segregated funds.

My knowledge on the subject is officially exhausted.

Laurelinda
05-01-2008, 12:37 PM
I think I might have a clue to the answer...

First the paragraph states that institutional clients with at least $25 million can participate in commingled ("mixed together") accounts. Then:

"While the institutional client owns the market value of its share in the separate account, the individual participants receive interest credited to the book value of their individual accounts. LifeCo annually resets the crediting rates, so that the market value gains and losses in the commingled account are shared with participants." Then the formula you refer to follows.

So let's say Client A has $50 million and Client B has $100 million. Neither has the $150 required to get their own portfolio, so they participate in a commingled account. The whole $150 million is invested together in one "separate account". Client's A and B "own" the market values of their respective shares in the "separate account", and receive interest credited to their individual book values ($50M and $100M).

Does that make any sense at all?

Car'a'carn
05-01-2008, 02:06 PM
I think I might have a clue to the answer...

First the paragraph states that institutional clients with at least $25 million can participate in commingled ("mixed together") accounts. Then:

"While the institutional client owns the market value of its share in the separate account, the individual participants receive interest credited to the book value of their individual accounts. LifeCo annually resets the crediting rates, so that the market value gains and losses in the commingled account are shared with participants." Then the formula you refer to follows.

So let's say Client A has $50 million and Client B has $100 million. Neither has the $150 required to get their own portfolio, so they participate in a commingled account. The whole $150 million is invested together in one "separate account". Client's A and B "own" the market values of their respective shares in the "separate account", and receive interest credited to their individual book values ($50M and $100M).

Does that make any sense at all?

I think this is what they meant.

hellmaster
05-01-2008, 11:30 PM
Thanks a lot, Laurelinda. You seem to have an answer for every single question I posted...I so wish I can be as prepared as you are :-)

Thanks for helping out, The Smokin' Cracktuary and Car'a'carn.

Hellmaster

Laurelinda
05-02-2008, 01:25 PM
I so wish I can be as prepared as you are :-)

I wish I could be as prepared as I pretend to be. :D

Honestly the Case Study freaks me out.